Navistar Now Seeking $2 Billion from Ford

Charges automaker is planning to introduce its own diesel engine by 2012

May 4, 2007 — Navistar International Corp. has counter-sued Ford Motor Co., for breach of contract, in a continuation of the stand-off that flared in February. Navistar's International Truck and Engine Corp. has been supplying diesel engines to Ford since 1979, and has a contract to continue that supplier relationship through 2012.

Ford sued Navistar earlier this year, claiming that Navistar has failed to comply with their agreement on warranty costs, and that it has increased engine prices without cause.

It was in that atmosphere that, late in February, Navistar halted delivery of the 6.4-liter Power Stroke diesel engines it builds for Ford's F-Series Super Duty pickup trucks at Indianapolis and Huntsville, AL. It stated that Ford had stopped honoring the terms of the supply agreement.

In early March, a Michigan court ordered Navistar to resume the deliveries, and instructed Ford to make full payment for the engines. The court also instructed the two companies to meet to seek a settlement of the dispute.

In court this week, at a hearing relating to Ford's original suit, Navistar filed its counter-complaint, contending that its pricing structure is consistent with contractual agreements, that Ford's warranty claims are without merit, and that Ford has stopped honoring the terms of the agreement under which engines have been built. Notably, Navistar is alleging that Ford's behavior in the entire matter is based on plans to develop its own diesel engine line, to be introduced before to 2012.

Navistar says Ford's failure to honor the contract entitles Navistar to at least $2 billion in damages. And, it states that Ford's actions are interfering with Navistar's supply-base agreements.

While the court has twice asked Ford and Navistar to reach a settlement and resolution, it now has set a schedule for discovery, anticipating a trial of the case.

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