Navistar International said on Monday that it has stopped shipping the all-new 6.4L Power Stroke diesel engines to Ford because of a “contract dispute.” Navistar builds the 6.4L Power Stroke that is the heart of the 2008 Ford F-Series Super Duty, one of the automaker’s key launches to help it become profitable again.

Last month, Ford sued Navistar over pricing and warranty costs related to the 6.0L Super Duty diesel engine. Ford claims that Navistar is not sharing warranty costs and says Navistar is not negotiating in good faith on prices for the new Power Stroke engine. Navistar said Ford had not honored the contract terms with the engine maker and it immediately halted production.

The F-Series truck line is Ford’s most profitable vehicle, and the Super Duty has averaged about 50 percent of the market for Heavy Duty trucks, and the Power Stroke is in 75 percent of all Super Duty trucks. Based on reports, Ford averages around $10,000 in profits on each diesel Super Duty sold.

Ford and Navistar are “tied at the hip,” Ford depends on the Navistar diesel engine and Navistar relies on the Ford production, according to Bear Stearns analyst Peter Nesvold. The cost of a disruption longer than a month, “could lead to an $11.6 billion in annualized revenue loss for Ford.” That’s a huge loss for Ford, and would be devastating to Ford’s turnaround efforts.

Ford says it has a stockpile of 6.4L Power Stroke engines, and that no production interruptions are expected.

## Source: Reuters ##

Posted in: Ford, Manufacturing, Trucks/Pickups, Business, News, Diesel
RSS 2.0 Feed | Comments | Permalink |  Email This Post