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Ford Settles Engine Dispute With Navistar
Ford Motor Co. will pay an unspecified amount to Navistar International Corp. to settle all litigation between them, and the companies will continue to collaborate on a variety of projects.
The companies agreed to end their diesel engine supply agreement effective Dec. 31, 2009, but they will continue their existing Blue Diamond Truck and Parts joint ventures.
Navistar will increase its 51% stake in the truck-making portion of Blue Diamond, which produces Ford-branded medium-duty commercial trucks in Mexico. Navistar also will receive a majority stake in Blue Diamond's replacement parts business, up from 49%.
The companies will continue their diesel engine supply relationship in South America.
Ford declined to comment Tuesday on its plans for replacing Navistar's PowerStroke diesel engines. But industry observers widely expect the auto maker to begin manufacturing its own diesel engines at a Ford plant in Mexico. The joint venture was scheduled to expire at end of 2009.
The agreement leaves an uncertain future for the Navistar's Indianapolis engine plant, where the majority of Ford's engines have been produced. The plant has been idled since spring because of sagging demand for engines.
The loss of the Ford engine business also will dent Navistar's revenue. Ford accounted for 7% of Navistar's $14.3 billion in revenue during 2008 and 44% of Navistar's total engine volume for the year.
Ford has been Navistar's largest engine customer for more than 20 years.
"The next phase of our relationship is consistent with Navistar's strategy to diversify our customer base," said Chief Executive Dan Ustian.
Mark Fields, Ford's president of The Americas, said the agreement was in the best interests of both companies and will help them "focus on meeting the needs of our current and future truck customers."
Navistar sued Ford in 2007, alleging breach of contract in a long-running dispute over a diesel engine contract it said the auto maker violated.
Navistar, which makes trucks and school buses in addition to diesel engines, said Ford broke its contractual promise that it would be the company's primary manufacturer and supplier of V-6 and V-8 diesel engines in North America.
In November, Navistar said it would record fiscal 2008 expenses ranging from $375 million to $430 million related to an impairment at its VEE Business Unit. It blamed the impairment on a significant reduction in Ford's demand for diesel engines.
U.S. auto makers saw their monthly sales decline sharply in 2008, and truck sales felt the most pain as the price of gasoline climbed above $4 in the early summer.
Navistar's shares fell 1.1% to $27.90 in after-hours trading and Ford's slid 0.4% to $2.47.
The companies agreed to end their diesel engine supply agreement effective Dec. 31, 2009, but they will continue their existing Blue Diamond Truck and Parts joint ventures.
Navistar will increase its 51% stake in the truck-making portion of Blue Diamond, which produces Ford-branded medium-duty commercial trucks in Mexico. Navistar also will receive a majority stake in Blue Diamond's replacement parts business, up from 49%.
The companies will continue their diesel engine supply relationship in South America.
Ford declined to comment Tuesday on its plans for replacing Navistar's PowerStroke diesel engines. But industry observers widely expect the auto maker to begin manufacturing its own diesel engines at a Ford plant in Mexico. The joint venture was scheduled to expire at end of 2009.
The agreement leaves an uncertain future for the Navistar's Indianapolis engine plant, where the majority of Ford's engines have been produced. The plant has been idled since spring because of sagging demand for engines.
The loss of the Ford engine business also will dent Navistar's revenue. Ford accounted for 7% of Navistar's $14.3 billion in revenue during 2008 and 44% of Navistar's total engine volume for the year.
Ford has been Navistar's largest engine customer for more than 20 years.
"The next phase of our relationship is consistent with Navistar's strategy to diversify our customer base," said Chief Executive Dan Ustian.
Mark Fields, Ford's president of The Americas, said the agreement was in the best interests of both companies and will help them "focus on meeting the needs of our current and future truck customers."
Navistar sued Ford in 2007, alleging breach of contract in a long-running dispute over a diesel engine contract it said the auto maker violated.
Navistar, which makes trucks and school buses in addition to diesel engines, said Ford broke its contractual promise that it would be the company's primary manufacturer and supplier of V-6 and V-8 diesel engines in North America.
In November, Navistar said it would record fiscal 2008 expenses ranging from $375 million to $430 million related to an impairment at its VEE Business Unit. It blamed the impairment on a significant reduction in Ford's demand for diesel engines.
U.S. auto makers saw their monthly sales decline sharply in 2008, and truck sales felt the most pain as the price of gasoline climbed above $4 in the early summer.
Navistar's shares fell 1.1% to $27.90 in after-hours trading and Ford's slid 0.4% to $2.47.
