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Navistar suspending Power Stroke production


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Navistar suspends diesel engine production; says Ford not honoring terms
Bryce G. Hoffman / The Detroit News
Monday February 26, 7:00 am ET

Link to Original Article @ DetNews
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Ford Motor Co. said Monday morning that a decision by key supplier Navistar International Corp. will not disrupt production of SuperDuty pickups "in the near term." However, the automaker would not say how long it could keep its truck lines running if the recalcitrant vendor holds out.

Navistar announced Monday that it has halted production of the Power Stroke diesel engine it makes for Ford because of an ongoing contract dispute. The Warrenville, Ill.-based engine manufacturer is the exclusive diesel engine supplier for Ford's heavy duty pickup trucks.

In a statement today, Navistar said it "pays its suppliers and employees under contract terms and that it expects Ford to honor the terms of its agreement."

But Ford said Navistar is the one violating that contract.

"Ford has always honored the agreement and will continue to do so in the future," said Ford spokesman Tom Hoyt. "We have been working very closely with Navistar for many months to resolve these contract issues."

In January, Ford sued Navistar, saying the engine maker was not complying with warranty cost-sharing agreements and that it had unjustifiably raised prices on its products. The suit said at the time that Navistar had threatened to cut off shipment if Ford did not pay the new prices for its engines.

Navistar said it will stop making the 6.4-litre Power Stroke at its Indianapolis and Huntsville, Ala. factories, but added that the Huntsville plant will continue production for other customers.

Any disruption of SuperDuty production would be disastrous for Ford. The struggling automaker just launched a redesigned SuperDuty line, and the big trucks are among the most popular and profitable vehicles it sells.

It is not the first time problems with a supplier have threatened an important new vehicle. Last fall, bankrupt Collins&Aikman Corp. briefly suspended parts shipments to Ford's factory in Hermosillo, Mexico, halting production of the Ford Fusion.
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This could be disastrous for Ford, and at the same time, very beneficial to GM. The Silverado is already putting tons of pressure on the F-Series sales title, and with the F-Series possibly losing a significant number of sales because of this, it gives the Silverado even more of a chance to beat the F-Series.

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Don't hate the headlights but the whole truck is very 1998 in appearance.

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"In breaking news, Toyota is announcing the debut of the new Tundra HD for the 2009 MY. Toyota's biggest pickup will offer industry-leading hp and torque with a 6.4 L V8 Turbodiesel developed with International Engines."

I was thinking along similar lines, but just a little less daring. Navistar owns workhorse chassis company. They do step van and both Class A and Class C motorhomes. The smaller versions of these are usually powered with Vortec engines, but perhaps the Powerstroke could be offered in conjunction with either the hyromatic or allsion transmission dependent upon application.

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Here's another article....

A dispute between Ford Motor (F) and its diesel engine supplier,

International Truck and Engine, threatens to halt production of Ford's

recently

launched and important heavy-duty F-Series trucks.

International said it quit shipping diesels to Ford on Thursday and

shut its Indianapolis engine plant on Monday, idling 1,200 workers.

"They haven't paid us. We can't continue to build excess inventory.

We're a just-in-time manufacturer," International spokesman Roy Wiley

says.

The dispute goes back to problems with 6-liter diesels that

International supplied for previous Ford heavy-duty trucks beginning in 2002.

In a lawsuit filed Jan. 11 in Oakland County, Mich., Circuit Court,

Ford says it "has incurred warranty repair, owner notification program

and

reacquired vehicle costs related to the 6.0L engine," and

International hasn't paid its share, as required in a contract. To compensate, Ford

withheld engine payments to International in December 2005 and again

last month.

"There were some warranty problems with that, but we thought those

problems were all cleared up with Ford," Wiley says. He calls the lawsuit

"totally without merit" and says his company will file a response in

court by the Wednesday deadline.

Ford has enough diesels to continue building 2008 heavy-duty F-Series

trucks "for the near term. We're not saying whether that's days, weeks

or

months," says Ford spokeswoman Becky Sanch.

The redesigned F-Series heavy-duties are one of Ford's highest-profile

introductions this year. Built at Ford's Kentucky plant, the

heavy-duties

make up 40% of F-Series sales, and 70% of them use the International

diesel, Sanch says. F-250s and F-350s usually are configured as pickups.

F-450s

and F-550s typically are sold to buyers who outfit them as tow trucks,

dump trucks and other commercial rigs.

Because buyers of heavy-duty trucks usually need them for business,

they might shift to trucks from General Motors and Dodge if Fords aren't

available.

"The timing is awkward to say the least, which makes me think it'll

get resolved," says David Healy, auto industry analyst at Burnham

Securities.

"The big version of the F is all they have new in that line this year.

It's all they have to advertise against the new Toyota pickup and GM's

new

line."

Diesel-truck sales generate about $11.6 billion annually for Ford,

according to Peter Nesvold, Bear Stearns analyst. That's 7.2% of $160.1

billion

total revenue last year. Ford reported a net loss last year of $12.7

billion and a $2.8 billion operating loss after taxes.

In a note to clients, Nesvold said Ford and International "are tied at

the hip for diesel engines for the F-250 and F-350 (which also happens

to be

one of Ford's few major launches this year)."

If the standoff lasts more than 30 days, both companies could suffer

significant losses, he said.

"A lot of money is involved. I can't tell you how much, but we

wouldn't have taken such drastic action unless it was significant," Wiley

says.

International's parent, Navistar International, was suspended from the

New York Stock Exchange on Feb. 13 for not filing revised financial

information for 2005 in time. Navistar shares trade over the counter,

pending an appeal of the NYSE ruling. The company says it hasn't filed

financial statements for 2005 or 2006, while it reviews apparent

errors.

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This whole thing doesn't surprise me. Although Ford could possibly take one of the 6.4s, reverse engineer it and make their own in-house diesel. I kinda figured that with the lawsuit from Ford, we'd hear that IHC would stop engine production for a short period of time.

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