Engine supply for hot pickup remains in doubt
Automotive News / March 5, 2007
A festering dispute between Ford Motor Co. and International Truck and
Engine Corp. is threatening to stall the launch of Ford’s most profitable
vehicle, the Super Duty pickup. Late last week, a Michigan judge issued a
temporary order forcing International to resume production of the Super
Duty’s 6.4-liter diesel engine. In return, the judge ordered Ford to pay
full price for the engine, rather than demand reimbursement for hefty
warranty costs on the previous version.
But the Super Duty pickup is not out of trouble yet. Another court hearing
on the matter is scheduled for Wednesday, March 7, in Pontiac, Mich. The
acrimony couldn’t come at a worse time. The 2008 Super Duty, which began
arriving at dealerships in early February, is off to a flying start and is
one of Ford’s few hot products. Prices range from $23,000 to more than
$60,000, and the truck often sells at full sticker with no incentives.
Diesels account for about 75 percent of the mix. The two companies are
trying to negotiate a settlement. But at a time when Ford’s turnaround hangs
in the balance, this legal battle threatens a vehicle that delivers up to
$17,000 in gross profits per unit, says Art Spinella of CNW Marketing
Research Inc., of Bandon, Ore.
The dispute boiled over on Feb. 23, when International halted engine
shipments rather than compensate Ford for those disputed warranty costs. The
weeklong stoppage cost Ford a precious 4,000 engines as the company tried to
fill 70,000 dealer orders for the truck. On Feb. 23, Ford tried to ease
dealers’ concerns with a memo stating that the dispute with International
would be settled before Ford ran out of diesel engines and had to curtail
production at its Kentucky Truck plant in Louisville, where all its Super
Duty trucks are built.
But less than a week later, it had to backtrack. Super Duty production was
trimmed Thursday, March 1, and suspended entirely Friday. Starting today,
March 5, the plant will run on one shift, down from three, for an indefinite
period. Sanch would not say how many units of production were lost or when
full production will resume.
Ford’s diesel drama
* Ford offers 6.9-liter diesel V-8 built by International as an option
on the F-100.
* The 6.9-liter grows to 7.3 liters.
* F-series Super Duty features new 6.0-liter engine with hydraulic fuel
* Chronic problems with fuel injectors and turbochargers lead Ford to
buy back about 500 trucks.
* Ford’s warranty costs for the troubled diesel engines continue to
* Ford sues International over warranty costs and withholds payments.
* Ford launches a new Super Duty with a high-tech International
* International halts shipments of the new engine.’A huge sucking hole’
Arizona dealer Randy Fuller is worried. Fuller, who runs Pinetop Motors in
rural Lakeside, Ariz., says a shortage of Super Duty trucks will create "a
huge sucking hole" in his business. "I’m rural," says Fuller. "Everything I
do is truck, and 70 percent is diesel. The stoppage has got me concerned.
Ford can’t afford it, and neither can the dealers."
The Super Duty is one of the few Fords that consumers are standing in line
to buy. Fuller sold his only 2008 Super Duty about two weeks ago, the same
afternoon it was delivered to the store. Some are on the way, but he doesn’t
know when they’ll arrive. Fuller sells about 200 heavy-duty Ford pickups per
Fuller doesn’t want to lose his customers at a time when rival truck-makers
are rolling out new products. Toyota has launched a redesigned full-sized
Tundra. General Motors is shipping a new heavy-duty truck to dealers now,
and Dodge dealers will get redesigned heavy-duty pickups this month.
To fend off this onslaught, Ford launched an expensive Super Duty ad
campaign that debuted during the Super Bowl. Ford is doing everything it can
to protect its cash cow.
According to the Automotive News Data Center, Ford has built about 38,500
Super Dutys since production began in December. Ford offers two gasoline
engines in the Super Duty: a 5.4-liter V-8 or a 6.8-liter V-10. But the
gasoline engines get poorer fuel economy than the diesel and can’t tow as
much. That’s why three out of four buyers choose the diesel.
The diesel’s popularity has upped the ante on the simmering warranty dispute
between Ford and International. On Jan. 11, Ford sued International to
recover warranty costs on the 6.0-liter diesel used in heavy-duty pickups
from 2002 through 2007.
In its lawsuit, Ford said the old diesel suffered malfunctions with the fuel
system, turbocharger and engine management software. Some early engines made
in 2002 and 2003 were so bad, Ford repurchased at least 500 trucks from
disgruntled consumers. Ford has never disclosed the precise amount of those
warranty claims, but losses may have totaled hundreds of millions of
To recoup that money, Ford demanded price cuts on International’s new
6.4-liter diesel engine. In response, International stopped shipping the
powerful turbodiesel, and Ford quickly went to court. Spinella predicts the
two sides will settle the dispute in 30 days or less. But International
doesn’t appear to be wavering. Says spokesman Roy Wiley: "The bottom line is
we have to be paid."