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Closing Set for Navistar Foundry, Engine Plant

Jan. 27, 2009
Indianapolis Casting fate sealed by recent settlement with Ford
Navistar International Corp. will close its Indianapolis engine plant and Indianapolis Casting Corp. subsidiary by July 31. The decision is a consequence of Navistar’s recent settlement with Ford Motor Co., which ended a bitter legal dispute as well as a 30-year supplier arrangement between the automaker and the engine manufacturer. “This is a difficult decision because of the impact it has on our employees and the community where we live and work,” stated Navistar Engine Group v.p. and general manager Eric Tech. “But, the significant change in Ford’s business plans has forced us to make this decision.” Indianapolis Casting casts gray and ductile iron engine blocks that are manufactured into diesel engines for Ford at the nearby engine plant. The foundry has about 550 workers, and has been in operation since the 1930s. About 700 workers are employed at the engine plant, which has been idled considerably in recent months because of falling demand from Ford. Navistar continues to operate an engine plant in Huntsville, AL, but that operation is supplied with blocks cast in Brazil by Tupy. The January 14 settlement maintains the supply agreement through the 2009 model year, and also indicates Navistar and Ford will continue to work together on other projects, including their Blue Diamond Truck and Parts joint ventures and a diesel-engine supply agreement in South America. But, ending the North American supply of diesel engines to Ford eliminates the main customer for the Indianapolis operations. The two former partners spent much of 2008 in court once Navistar suspended deliveries of the Power Stroke diesel engine — a result of a dispute over the supply terms for the engines. Ford installs the Power Stroke 6.4-liter diesel engines in its F-250, F-350, and F-450 Super Duty pick-ups. Navistar contended its move was the result of Ford failing to honor the terms of their supply agreement. Earlier, Ford had sued Navistar for failing to comply with their agreement on warranty costs, and for increasing engine prices without cause. That dispute was finally resolved by the January 14 settlement. There remains some speculation about where Ford will source diesel engines beyond this year. Its Cleveland iron foundry is slated to close in 2010, as is the adjacent engine plant. Navistar says its engine business remains viable because of its product and customer diversification efforts. This includes new supplier arrangements for its mid-range diesel engines with military and other global OEMs (including in China and India), and its new MaxxForce 11/13 diesel engine line. Soon, it will begin manufacturing a new 15-liter engine.