RUMORS OF FORD-NAVISTAR DEAL FIND A FRESH SUPPLY OF FUEL

RUMORS OF FORD-NAVISTAR DEAL FIND A FRESH SUPPLY OF FUEL

Like all good rumors that refuse to die, the one that has been making the rounds about Ford Motor Co. and Navistar International Corp. has a seemingly never-ending supply of fuel to keep it going.

An article this week in the Detroit News about a secret Ford program to compete with Japanese automakers has a remarkable number of elements that seem to support the theory, first floated about a month ago, that the No. 2 carmaker would make a bid to buy the No. 1 heavy-truck maker.The article, dealing with a reported Ford Concept to Customer project, said that part of the plan is to make a big hit acquisition and to increase in-house production of automotiveparts. The main thrust of the program, according to the News, is to cut the time it takes to develop new products to compete with the Japanese.

All three aims strike a chord with Navistar, at least on the commercial truck side.

Although industry analysts have almost unanimously debunked the Navistar rumor, Ford officials have said privately that talks did take place some years ago on a possible Ford acquisition of Chicago-based Navistar's engine business. In retrospect, the officials said, it would have been a good thing if Ford had gone through with the deal.

Ford is one of Navistar's biggest customers thanks to the 6.9- and 7.3- liter diesel engines which Navistar has supplied to Ford for its Econoline series and other light trucks.

With a new contract signed last year cementing the relationship well into the 1990s, some analysts have suggested that Ford could save by simply buying the business.

According to James A. Mateyka, a vice president with the consulting firm of Booz, Allen & Hamilton Inc. in Bethesda, Md., Ford has probably already invested heavily in the upgrading of Navistar's engine from 6.9 to 7.3 liters.

It would make a whole lot of sense to buy (Navistar's) Indianapolis plant, Mr. Mateyka said. They probably own half of it already with the long- term contract.

Navistar officials have also said that terms of the arrangement allow Ford to use the engine only in areas where the companies do not compete, namely the medium-duty truck business where the companies have roughly equal shares. A sale could free Ford to use the engine throughout its line.

Another possible Ford-Navistar link is the huge fleet sale Navistar made this year to U-Haul Rental System of Phoenix. Navistar officials say they moved the newly designed U-Haul vehicle from concept to customer in 11 months, a turnaround that raised some eyebrows at Ford which has also supplied U-Haul over the years.

But observers see this link as far-fetched. Navistar has nothing to teach Ford about product development, said one analyst who asked not to be named, and the automaker is looking for bigger fish to fry.

Both companies are still refusing to comment officially on the rumors. Ford spokesman Chuck Olbricht in New York also said the company would not speculate on other people's speculation about the reported Ford project.

The rumors have piqued the curiosity of managers at both companies, however, and neither side has issued a denial. The idea of a whole-hog acquisition has been dismissed, in part because of antitrust questions in the heavy-duty truck segment and near-certain antitrust problems in the medium- duty field.

But all the smoke of the past month is still keeping a fire-watch on both companies.

They've been in an acquisitive mode and we've been in an acquisitive mode for some time, a Navistar official said.