Ford sues Navistar in engine dispute

Ford Motor Co. is suing Navistar International Corp. over pricing and supply of diesel engines, according to a story in the Chicago Tribune today.

Navistar, which for a decade has exclusively supplied the diesel engines Ford uses in its heavy-duty pickup trucks, is being sued in a Michigan state court over the price it charges Ford and in relation to its financial obligations in warranty claims involving the Navistar engine, according to the Tribune.

The story quotes a Navistar spokesman as saying Ford's claims are "totally without merit" and adding that Navistar intends to "vigorously respond in court."

According to the lawsuit, Navistar started providing Ford with a new 6.4-liter diesel engine late in 2006, to go along with the

6-liter engine it had been supplying. The complaint says that Navistar has "failed to act in good faith" in its bargaining with Ford over the price of the 6.4-liter engine.

Ford's lawsuit says that Navistar has threatened to refuse to ship the new engine to Ford unless Ford pays the price Navistar is demanding-which would breach the supply agreement, Ford says.

According to the Tribune story, Ford claims Navistar is not complying with its obligations under warranty-sharing, refusing to pay the amounts Ford says it is owed-a portion of the costs Ford incurs for engine-related warranty repairs. Ford’s reaction was to "debit" Navistar for part of those costs, in essence withholding money it owes Navistar for engines in a bid to recover what Ford says it is owed.

"(The debit) is simply a business transaction intended to resolve a dispute we have with (Navistar)," Ford said in a statement. "Regrettably, we have no other choice but to take the debit and file the lawsuit."

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