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Navistar International Corp. said Monday it is suspending production of a diesel engine it builds for Ford Motor Co. because Ford has stopped honoring contract terms.

Ford uses the engines in its heavy-duty pickup trucks, which comprise about 40% of F-Series truck sales, Bloomberg News said. Navistar has been an engine supplier to Ford, the No. 2 U.S. automaker, since 1979, Navistar said in a statement.

Ford sued Navistar in January in a Michigan state court over a contract dispute regarding warranty costs and engine prices for the 6.4-liter engines, Bloomberg said. Navistar is Ford's sole supplier of the engines, called Power Strokes.

The engines are produced at Navistar plants in Huntsville, Ala., and Indianapolis. Navistar ships the engines to a Ford plant in Louisville, Ky. A company spokesman said the Indianapolis plant will be idled starting today, Bloomberg reported. Navistar is the parent company of International Truck and Engine Corp.

Ford lost a record $12.7 billion last year and is counting on the redesigned truck to protect F-Series sales from competitors, Bloomberg said. Ford sold 796,039 F-Series trucks in the United States last year, a 12% decline from 2005, Bloomberg said.

The automaker said in the lawsuit that Navistar began raising prices for the engines "without adequate explanation or support for its actions," according to Bloomberg. Navistar said then that the suit was without merit. L&MT