Ford: Contract Dispute, Lower Sales
February 27, 2007

It’s one problem after another for Ford.

Navistar International Corp. will stop supplying diesel engines to Ford for its all-important F-Series Super Duty pickup trucks, just now hitting showrooms; and the automaker confirms its February sales will show a double-digit drop when reported later this week.

Navistar and Ford have been in an ongoing contract dispute over the PowerStroke diesel engine for some time. In a statement released yesterday, Navistar said it "pays its suppliers and employees under contract terms and that it expects Ford to honor the terms of its agreement."

Ford sued Navistar in January, insisting Navistar is the one violating its contract because it won’t comply with warranty cost-sharing agreements and had unjustifiably raised prices. The suit said Navistar had threatened to cut off shipment of engines if Ford didn’t pay the higher price.

Navistar said Monday it will, indeed, stop supplying diesel engines to Ford. Ford, meantime, insists production of the truck, which began arriving in showrooms this month, will not be disrupted “in the near term,” but the automaker would not say how long it can keep its Kentucky assembly lines rolling without the engines.

The dispute couldn't come at a worse time. About 40 percent of the 800,000 F-Series trucks sold last year had diesel engines. The Super Duty is one of Ford’s only new models this year. And the Super Duty is intended to give the F-Series line a lift against General Motors’ new pickup trucks, the Chevrolet Silverado and GMC Sierra, and to ward off Toyota’s all-new Tundra. The F-Series is Ford’s biggest seller –- and the industry’s best-selling vehicle for a couple of decades -– as well as a large contributor to Ford’s bottom line, which needs a boost after Ford’s record-setting 2006 loss of $12.7 billion.

Double-digit sales drop

On top of its battle with Navistar, Ford issued an official warning Monday: its U.S. sales will be lousy for February when they are reported later this week. Ford is confirming sales will be off 10 to 15 percent. Ford blames the drop on its on-purpose cut back in daily rental sales and strong pickup sales in February last year.

Edmunds.com is forecasting even lower sales than that. Edmunds predicts when sales are announced Thursday Ford will report selling 184,000 units in February 2007, down 23.1 percent compared to February 2006 but up 14.2 percent from January 2007. This would result in a market share of 15.2 percent of new car sales in February 2007 for Ford, down from 19.0 percent in February 2006 and up from 14.8 percent in January 2007.

Posted by Michelle Krebs at 6:47 AM under Ford , News | Comments (0) | digg this | Seed Newsvine