Industry News
Navistar & Ford Settle Diesel Dispute
January 14, 2009
The on-going diesel engine feud between Ford Motor Co. and Navistar International Corp. has apparently been resolved with the announcement of an agreement to restructure ongoing business relationships between the two companies. The agreement apparently settles all existing litigation between the companies.
The feud started in 2007, when Navistar sued Ford alleging breach of contract in a what had been a long-running dispute over a diesel engine supply contract between the two companies. Navistar 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.
The new deal calls for Ford and Navistar to end their current diesel engine supply agreement effective Dec. 31, 2009. However, the companies will continue to collaborate on a range of ventures, including their existing Blue Diamond Truck and Parts joint ventures.
Navistar will acquire additional equity beyond the 51% it currently holds in the Blue Diamond joint ventures, which will continue to offer F-650 and F-750 medium duty trucks. It will also reportedly assume a majority stake in the Blue Diamond parts support business. As a result of the agreement, Ford will make a payment to Navistar.
Ford and Navistar also will continue their diesel engine supply relationship in South America.
Ford did not say how it would replace the PowerStroke diesels in its line. Industry speculation has Ford possibly building those diesels at a plant in Mexico. Another possibility is Ford's Brook Park, Ohio facility. The future of Navistar’s Indianapolis plant, which built the PowerStroke diesels is also in question. That plant has been idle since early 2008.
“Navistar and Ford benefitted from a successful partnership that provided value to both companies for nearly three decades. However, it’s in our best interests to resolve our conflict and continue our relationship with each other in other areas,” said Dan Ustian, Navistar chairman, president and chief executive officer. “The next phase of our relationship is consistent with Navistar’s strategy to diversify our customer base, while continuing to provide value to both companies through our existing joint ventures and our supply agreement in South America.”
"We are pleased to have reached an agreement with Navistar that we believe is in the best interest of both companies," said Mark Fields, Ford's president of The Americas. "This agreement comprehensively addresses our business relationship with Navistar and will help both companies focus on meeting the needs of our current and future truck customers."
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