Erstwhile partners International Truck & Engine Corp. and Ford Motor Co. are now embroiled in a major dispute over Ford’s payment terms for the PowerStroke diesel engines International supplies to Ford for its heavy-duty pickups. The disagreement has reached the point that International has suspended production of those engines.

International, the exclusive diesel engine supplier for Ford’s heavy-duty pickups since 1979, said it has stopped production of the 6.4 liter PowerStroke at its Indianapolis, IN, and Huntsville, AL plants pending resolution of the dispute. The company said its Huntsville factory would continue to produce engines for other customers.

The wrangling comes at a crucial time for Ford, as a large portion of its F-Series pickups sales are sold with PowerStroke engines. The automaker sold 796,039 F-Series units in 2006, with 40% of them SuperDuty pickups mostly equipped with diesel engines. Those engines carry a substantial up-charge as well. Ford charges $6,895 extra for ’08 model Super Duty trucks that come equipped with diesels.