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From Automotive News:

Ford, International come to terms, for now

Richard Truett | Automotive News / March 9, 2007 - 1:00 am / UPDATED: 3/9/2007 2:11 P.M.

DETROIT --Ford Motor Co. does not have to worry about running out of diesel engines for its hot-selling F-series Super Duty pickups, at least temporarily.

Ford and International Truck and Engine Corp. agreed late today to holster their lawyers in a legal duel over warranty costs, payment of invoices and other issues that caused International recently to cut off shipments of the new 6.4-liter Power Stroke diesel engine used in the 2008 F-series Super Duty trucks that went on sale in February.

The agreement came after a court hearing on Wednesday, March 7, when Oakland County, Mich., Judge John McDonald told lawyers for the two companies if they couldn’t solve the dispute themselves he would settle it for them.

Lawyers for both sides negotiated late Wednesday and all day today.

The agreement Ford and International calls for:

Ford to stop debiting International's invoices for engines.


Ford has withheld about $125 million from International since January. Ford claims it is owed the money to cover warranty costs related to a faulty fuel system and other maladies that dogged F-series Super Duty trucks powered by the previous-generation 6.0-liter Power Stroke diesel engine made from 2002-2006. Ford agreed to pay in full for engines it receives from International.

International agreed to keep engines flowing to Ford while lawyers work out payment issues related to the warranty costs.


International halted engine shipments to Ford on Feb. 26. Ford went to court and obtained a temporary order from Judge McDonald to resume engine production. Ford was forced to trim production at the Kentucky Truck plant in Louisville, Ky., where the F-series Super Duty is built and lost an estimated 4,000 units of production.

The companies agreed to have their officers meet and try to negotiate a solution.


At issue are hefty warranty reimbursements Ford says International owes. Ford claims it has spent $1 billion on repairs and recalls to fix the 6.0-liter Power Stroke diesel engine. International disputes that claim.

Another sore point is the price of the new engine. International wants to charge Ford $7,673 per engine for the 6.4-liter Power Stroke. Ford believes it should pay $6,167.

The new Super Duty, which includes the F-250, F-350 and F-450 pickups, is a hot seller for Ford. It is also a cash cow. The truck ranges in price from about $23,000 to more than $60,000 for fully loaded F-450 King Ranch models.

International has been Ford's diesel engine supplier since 1979, building all of the company’s Power Stroke diesel engines. Relations between the two were good until problems appeared on the 6.0-liter Power Stroke.

Terms of the agreement call for Ford to pay International $80 million by Tuesday, March 13. That's half of the amount of money Ford has withheld from the supplier in the warranty dispute.

The next hearing on the case is set for March 30.
 

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You know that feeling you get when you meet two really dysfunctional people and think: "Wow, I bet they'd be perfect for each other."?

Something tells me we're all gonna be ok...
 
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