and Ford Continue to Fight Over Diesels
An ugly and very public legal dispute between Ford Motor Company and Navistar International over warranty obligations and high prices for diesel engines just keeps getting uglier.
In an amended counter-suit against Ford, Navistar claims that Ford is internally developing a replacement for the brand new 6.4-liter Power Stroke diesel engine that Navistar supplies for use in Ford's 2008 Super Duty pickups. Navistar is seeking more than $2 billion in compensation if Ford fails to honor its purchase contract with Navistar, which runs through 2012, saying it has received indications that the new diesel motor will be ready for introduction before that date.
The dispute started in January when Ford filed a lawsuit in Michigan state court against Navistar, arguing that Navistar unjustifiably raised engine prices and had not been paying its share of repair costs for Power Stroke diesel warranty claims. Ford says it has spent $1 billion on repairs and recalls to fix problems with legacy 6.0-liter Power Stroke diesel engines the 6.4-liter replaced. Ford further contended that the purchase contract allowed it to debit Navistar's invoices to recover these costs, which it had done up to $160 million after filing suit.
In late February, in response to Ford's legal and financial actions, Navistar stopped shipping Power Strokes, causing an interruption in Super Duty manufacturing estimated to be about 4,000 units of production.
In early March the Michigan judge presiding over the case issued a consent decree forcing Navistar to resume Power Stroke shipments and ordering Ford to pay half of the amount it had debited while the two continued to work out their differences. Along with the $80 million payment to Navistar, Ford also agreed to pay $7,673 per engine instead of the $6,167 it believed to be the fair price until the dispute is finally settled.