Round One Of Ford, Navistar Fight Seen Going To Engine Maker
Manufacturing.Net - March 9, 2007
DETROIT (Dow Jones/AP) - Ford Motor Co. will repay Navistar International $80 million as part of a deal that will ensure continued supply of diesel engines for its Super Duty pickup trucks in the immediate future.
Ford had debited about $160 million from Navistar invoices as part of the dispute over warranty and pricing issues. An agreement reached Thursday and released Friday by a Michigan circuit court judge states Ford must transfer $80 million to Navistar by March 13.
The auto maker can pursue a return of the $80 million through its ongoing lawsuit. Ford sued Navistar in January in Oakland County Circuit Court in Michigan, citing the warranty and pricing issues.
Dearborn-based Ford has argued that its contract with Navistar states Ford may debit invoices, while Navistar disputes that claim.
Navistar, based in Warrenville, Ill., stopped shipping the Power Stroke diesel engines to Ford last week, prompting the auto maker to go to court to force Navistar to continue deliveries.
The two companies have now agreed to a consent order under which Navistar will continue shipping engines to Ford, and the auto maker will not debit Navistar's invoices.
Ford also will pay Navistar's price of $7,673 for each engine. Ford had argued that $6,167 was a fair price for the engines.
The $80 million payment was detailed in a copy of the order made available Friday. The order also requires Ford and Navistar to engage in ''high-level meetings'' and try to reach a final resolution to the dispute.
The consent order alleviates concerns, at least temporarily, of a long delay for one of Ford's most important launches of the year. Ford's Louisville, Ky., plant curtailed production last week and shut down last Friday after Navistar halted shipments. Ford said the plant began ramping production back up early this week and will be back at full speed on Monday.
Ford last year sold 796,000 F-series trucks, about 40 percent of them Super Duty versions, which are larger and often purchased by contractors and builders. Navistar makes between 225,000 to 300,000 diesel engines a year for Ford trucks.
Bear Stearns analyst Peter Nesvold said in a Friday research note that Ford paying Navistar's price is worth $250 million to $300 million to Navistar on an annualized basis.
Nesvold wrote that the judge also indicated that he might not convert Ford's temporary restraining order, which forced Navistar to ship the engines, to a preliminary injunction if the lawsuit were to continue to trial.
''We score this round in Navistar's favor,'' Nesvold wrote.
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