gold-n-rod
02-27-2007, 02:29 PM
Ford tussles with maker of diesels for F-Series
By James R. Healey, USA TODAY
Created: 2/27/2007 11:59:59 AM
Updated: 2/27/2007 12:01:22 PM
A dispute between Ford Motor and its diesel engine supplier, International Truck and Engine, threatens to halt production of Ford's recently launched and important heavy-duty F-Series trucks.
International said it quit shipping diesels to Ford on Thursday and shut its Indianapolis engine plant on Monday, idling 1,200 workers.
"They haven't paid us. We can't continue to build excess inventory. We're a just-in-time manufacturer," International spokesman Roy Wiley says.
The dispute goes back to problems with 6-liter diesels that International supplied for previous Ford heavy-duty trucks beginning in 2002.
In a lawsuit filed Jan. 11 in Oakland County, Mich., Circuit Court, Ford says it "has incurred warranty repair, owner notification program and reacquired vehicle costs related to the 6.0L engine," and International hasn't paid its share, as required in a contract. To compensate, Ford withheld engine payments to International in December 2005 and again last month.
"There were some warranty problems with that, but we thought those problems were all cleared up with Ford," Wiley says. He calls the lawsuit "totally without merit" and says his company will file a response in court by the Wednesday deadline.
Ford has enough diesels to continue building 2008 heavy-duty F-Series trucks "for the near term. We're not saying whether that's days, weeks or months," says Ford spokeswoman Becky Sanch.
The redesigned F-Series heavy-duties are one of Ford's highest-profile introductions this year. Built at Ford's Kentucky plant, the heavy-duties make up 40% of F-Series sales, and 70% of them use the International diesel, Sanch says. F-250s and F-350s usually are configured as pickups. F-450s and F-550s typically are sold to buyers who outfit them as tow trucks, dump trucks and other commercial rigs.
Because buyers of heavy-duty trucks usually need them for business, they might shift to trucks from General Motors and Dodge if Fords aren't available.
"The timing is awkward to say the least, which makes me think it'll get resolved," says David Healy, auto industry analyst at Burnham Securities. "The big version of the F is all they have new in that line this year. It's all they have to advertise against the new Toyota pickup and GM's new line."
Diesel-truck sales generate about $11.6 billion annually for Ford, according to Peter Nesvold, Bear Stearns analyst. That's 7.2% of $160.1 billion total revenue last year. Ford reported a net loss last year of $12.7 billion and a $2.8 billion operating loss after taxes.
In a note to clients, Nesvold said Ford and International "are tied at the hip for diesel engines for the F-250 and F-350 (which also happens to be one of Ford's few major launches this year)."
If the standoff lasts more than 30 days, both companies could suffer significant losses, he said.
"A lot of money is involved. I can't tell you how much, but we wouldn't have taken such drastic action unless it was significant," Wiley says.
International's parent, Navistar International, was suspended from the New York Stock Exchange on Feb. 13 for not filing revised financial information for 2005 in time. Navistar shares trade over the counter, pending an appeal of the NYSE ruling. The company says it hasn't filed financial statements for 2005 or 2006, while it reviews apparent errors.
Contributing: The (Louisville) Courier-Journal
By James R. Healey, USA TODAY
Created: 2/27/2007 11:59:59 AM
Updated: 2/27/2007 12:01:22 PM
A dispute between Ford Motor and its diesel engine supplier, International Truck and Engine, threatens to halt production of Ford's recently launched and important heavy-duty F-Series trucks.
International said it quit shipping diesels to Ford on Thursday and shut its Indianapolis engine plant on Monday, idling 1,200 workers.
"They haven't paid us. We can't continue to build excess inventory. We're a just-in-time manufacturer," International spokesman Roy Wiley says.
The dispute goes back to problems with 6-liter diesels that International supplied for previous Ford heavy-duty trucks beginning in 2002.
In a lawsuit filed Jan. 11 in Oakland County, Mich., Circuit Court, Ford says it "has incurred warranty repair, owner notification program and reacquired vehicle costs related to the 6.0L engine," and International hasn't paid its share, as required in a contract. To compensate, Ford withheld engine payments to International in December 2005 and again last month.
"There were some warranty problems with that, but we thought those problems were all cleared up with Ford," Wiley says. He calls the lawsuit "totally without merit" and says his company will file a response in court by the Wednesday deadline.
Ford has enough diesels to continue building 2008 heavy-duty F-Series trucks "for the near term. We're not saying whether that's days, weeks or months," says Ford spokeswoman Becky Sanch.
The redesigned F-Series heavy-duties are one of Ford's highest-profile introductions this year. Built at Ford's Kentucky plant, the heavy-duties make up 40% of F-Series sales, and 70% of them use the International diesel, Sanch says. F-250s and F-350s usually are configured as pickups. F-450s and F-550s typically are sold to buyers who outfit them as tow trucks, dump trucks and other commercial rigs.
Because buyers of heavy-duty trucks usually need them for business, they might shift to trucks from General Motors and Dodge if Fords aren't available.
"The timing is awkward to say the least, which makes me think it'll get resolved," says David Healy, auto industry analyst at Burnham Securities. "The big version of the F is all they have new in that line this year. It's all they have to advertise against the new Toyota pickup and GM's new line."
Diesel-truck sales generate about $11.6 billion annually for Ford, according to Peter Nesvold, Bear Stearns analyst. That's 7.2% of $160.1 billion total revenue last year. Ford reported a net loss last year of $12.7 billion and a $2.8 billion operating loss after taxes.
In a note to clients, Nesvold said Ford and International "are tied at the hip for diesel engines for the F-250 and F-350 (which also happens to be one of Ford's few major launches this year)."
If the standoff lasts more than 30 days, both companies could suffer significant losses, he said.
"A lot of money is involved. I can't tell you how much, but we wouldn't have taken such drastic action unless it was significant," Wiley says.
International's parent, Navistar International, was suspended from the New York Stock Exchange on Feb. 13 for not filing revised financial information for 2005 in time. Navistar shares trade over the counter, pending an appeal of the NYSE ruling. The company says it hasn't filed financial statements for 2005 or 2006, while it reviews apparent errors.
Contributing: The (Louisville) Courier-Journal