Navistar International Corp. said it has reached a settlement with Ford Motor Co. over the automaker's decision to cancel a V-6 diesel engine contract.

Navistar, in an 8-K filing with the Securities and Exchange Commission, said the agreement includes "appropriate recovery of excess costs" for a plant Navistar built to make the engines. Both parties are released from their obligations under the contract.

Navistar said the settlement would not materially affect its financial outlook. Financial terms were not disclosed.

Navistar had seeked reimbursement from Ford to recover investment and development costs for the engine. Navistar had built an engine assembly plant in Huntsville, AL, and developed a V-6 diesel engine, which it could sell only to Ford.

Ford notified the company last October of its decision to postpone plans for the new engine after determining the business was no longer viable. The engine maker took a pretax charge of $170 million because of the cancellation of the 1998 agreement.

Navistar was to provide Ford with V-6 diesel engines for its F-150 pickup truck, Econoline 150 vans, Ford Expeditions and Lincoln Navigators from model years 2002 through 2012.

Navistar already supplies Ford with V-8 diesel engines for its F-Series Super Duty pickups under an exclusive contract that runs through 2012. Navistar also produces medium-duty trucks for Ford in Mexico under a joint venture called Blue Diamond.