Navistar and Ford Reach News Business Agreement

Ford and Navistar are both U.S. hallmarks of the commercial truck industry. For almost three decades, Navistar has been a long-time supplier for Ford’s marquee brand of trucks, a relationship that has benefited both companies in big ways. But that business arrangement has definitely had its highs and lows over the years. It’s been particularly rocky of late.

Navistar International Corp. has been locked in a legal feud with Ford Motor Co. over its longstanding diesel-engine supply contract — a dispute that looked to have no end in sight — until now. In 2001, Navistar formed a joint venture with Ford to manufacture medium-duty trucks and parts, including diesel engines for both parent companies. The new company is called Blue Diamond Truck Co. and it operates in the Navistar plant in Escobedo, Mexico.

In 2007, Navistar International Corp. filed a lawsuit against Ford Motor Co. for breach of contract relating to its diesel engine contract involving the Ford F-150 pickup. The suit contended that Ford was developing a 4.4-liter diesel engine for production in North America by late 2009 or 2010 — or possibly earlier — intending to produce the engine itself for use in the F-150 and possibly other vehicles. The suit said Ford could not do that without violating its contract with Navistar. The company has been the exclusive diesel engine supplier for Ford’s heavy-duty pickup trucks since 1979.

But in January, the two companies decided to settle their differences.

“Navistar and Ford benefitted from a successful partnership that provided value to both companies for nearly three decades. However, it’s in our best interests to resolve our conflict and continue our relationship with each other in other areas,” said Dan Ustian, Navistar chairman, president and CEO. “The next phase of our relationship is consistent with Navistar’s strategy to diversify our customer base, while continuing to provide value to both companies through our existing joint ventures and our supply agreement in South America.”

Ford Motor Co. and Navistar International Corp. reached an agreement to restructure their ongoing business relationship and settle all existing litigation between the companies. As a result of the agreement, the companies will end their current diesel engine supply agreement effective Dec. 31, 2009. Navistar’s contract to supply diesel engines for Ford’s heavy-duty pickups had been slated to expire at the end of 2012.

However, the companies will continue to collaborate on a range of initiatives, including their existing Blue Diamond Truck and Parts joint ventures. Navistar will acquire additional equity in the Blue Diamond joint ventures, which will continue to offer dealers and customers F-650 and F-750 medium-duty trucks, as well as parts support for a variety of Ford products, including Ford’s PowerStroke Diesel-equipped trucks. Ford and Navistar also will continue their diesel engine supply relationship in South America. As a result of the agreement, Ford will make a payment to Navistar, but details were not given on the amount.

“We are pleased to have reached an agreement with Navistar that we believe is in the best interest of both companies,” said Mark Fields, Ford’s president of The Americas. “This agreement comprehensively addresses our business relationship with Navistar and will help both companies focus on meeting the needs of our current and future truck customers.”