Navistar International Transportation Corp. has supplied diesel engines to Ford Motor Co. for almost 30 years. Yet in late February Navistar, embroiled in a financial dispute with Ford, temporarily cut off all engine shipments to its single biggest customer.

The move dramatized a broad shift in the balance of power in the struggling U.S. auto industry. The dispute involved competing views of warranty claims and price contracts. But at its core was the engine supplier's refusal to play an old Detroit game, in which U.S. car makers have deflected the pressure of global competition by repeatedly forcing suppliers to trim their own prices.

For the old Big Three of Ford, General Motors Corp. and the Chrysler unit of DaimlerChrysler AG, the case was evidence of a new reality. As the old-line U.S. industry moves into a historic restructuring, it finds itself surrounded by parts suppliers from which it can no longer easily squeeze price concessions. The reason: Many suppliers have already faced, and in many cases painfully adapted to, the harsh changing dynamics of the global auto market.

It was Detroit's relentless past pressure on the suppliers, paradoxically, that ended up leaving some in a stronger position to resist Detroit's current demands. Some parts makers went out of business. Some are on the verge of doing so -- forcing Detroit to back off its demands for fear of losing another parts source. Other suppliers, such as Delphi Corp., have sought bankruptcy reorganization, enabling them to shed unprofitable contracts, high-cost labor and excess factories.

Still other suppliers fell into the hands of private-equity investors, who eschew old habits like accepting money-losing contracts for the sake of keeping up relationships and volume.

Finally, steel suppliers have both restructured and been blessed by growing demand, which endows them with pricing power when they face off against auto makers. North American steelmakers are fewer and stronger, reducing the odds that one firm desperate to keep its mills occupied will knuckle under to price demands from car makers.

The power shift has wide implications for Detroit's much-diminished Big Three, which suffer from a wide array of troubles: high-cost labor, for instance, plus weak sales -- at a time of high fuel costs -- of gas-guzzling SUVs on which they bet heavily during the 1990s. The Big Three had already lost the ability to dictate price to consumers, who can use the Internet to shop. Dealers, too, are less in Detroit's thrall, as many smaller ones have been replaced by publicly traded chains that can better resist any effort to saddle them with excess inventory.

Asian and European car brands can withstand the new supplier dynamic better. Unlike Detroit, they aren't burdened by "legacy costs" such as health care. And their reputations with consumers give them more leeway to price vehicles incrementally higher. In addition, some of the parts makers that are pushing back serve mainly the Big Three.

Detroit's reduced power to shift cost burdens could mean more painful job cuts, plants closings and asset sales to raise case. Ford, GM and Chrysler have already shed 137,000 jobs yet still struggle to turn a profit on core operations. They are currently aiming to cut more than 80,000 additional union jobs by the end of 2007.

Tony Brown, Ford's head of global purchasing, says today's "environment makes it more difficult to achieve our savings goals, but not impossible." He is tasked with finding $6 billion in commodity-cost savings at Ford. The goal originally was to do that by 2010. Ford now says it will take a year or two longer.

"The material cost lever is one you always use in a restructuring," Mr. Brown says. "It's not off the table, but in the face of rising material costs, overcapacity [and] supplier bankruptcies, it is harder." Mr. Brown declined to comment on the dispute with engine maker Navistar, but a Ford spokeswoman said the auto maker is "continuing to talk, and hopefully we can reach a resolution."

The shifting dynamic means auto makers must sometimes spend more time and money trying to keep weak suppliers afloat and their plants running. Suppliers in crisis are more likely to refuse price-cut demands because they want to avoid bankruptcy. And car makers know they can't squeeze much more from a sick supplier or they risk having it fail and not deliver needed parts. Ford and others in the industry recently put up at least $35 million in loans and other aid to keep afloat one troubled plastics supplier.

Ford has also acknowledged in U.S. Bankruptcy Court in Detroit that it had paid "tens of millions of dollars" to keep a supply of plastic parts coming from Collins & Aikman Corp., an auto supplier in Chapter 11. In a pricing dispute with Ford, C&A late last year briefly shut down production of Ford's Fusion sedan.

At DaimlerChrysler, "I get a list every two weeks of troubled suppliers. It's a list that runs from A to about V of companies that can't pay their bills or whatever," says Tom Sidlik, head of global purchasing, lifting a three-page sheet of suppliers off his desk. "There have been years and years of stress on the supply base, so obviously when you go into a downturn it's harder to get more efficiencies."

Mr. Sidlik oversees €85 billion in purchasing for Daimler's Chrysler and Mercedes cars and its Freightliner trucks. Chrysler's turnaround plan calls for him to cut material costs a total of $1.5 billion by 2009 and to move $5 billion in purchasing to low-cost countries. He maintains that despite higher steel costs, he will see a net reduction in material costs because of parts-sharing and changes such as fewer fasteners per vehicle.

Auto-parts economics were an eye opener for Michael Lord, who came to the industry last fall after a career in other industries such as cosmetics and toys. "In this industry, a lot of the economics were upside down," says Mr. Lord, chief executive of Bluewater Plastics in Marysville, Mich. "There were mathematical impossibilities where people thought they could handle higher resin prices and give back 2-3% a year to the auto makers."

Mr. Lord says auto makers and large "tier one" parts makers continue to ask Bluewater to accept business under terms that cover just labor and materials, with nothing left over for overhead or profit. "We are constantly getting calls asking, 'Can you take on this or that business from another supplier?'" says Mr. Lord. "We tell them, 'Here is our price,' and many times they get offended and say, 'We won't be doing business with you.' That threat hasn't proven valid."

Stiffening the spines of suppliers, in some cases, is their ownership by private-equity firms. Mr. Lord came to Bluewater shortly after it and a similar business were acquired in October by private-equity investors, KPS Special Situations Funds. He closed three plants, cut about 200 of the 1,700 jobs and reduced annual overhead by more than $10 million. The smaller capacity reduces Bluewater's temptation to accept ill-paying work just to keep factories humming, and lets it be more disciplined in bidding on contracts.

Mr. Lord says that in mid-February, a large parts supplier called asking Bluewater to provide plastic parts for a new model being launched by a Detroit auto maker. He says the price offered was much too low, and when he refused, the caller hung up after saying, "Obviously, you don't want to be strategic to us." Mr. Lord says he's confident he'll hear back from the company "because I know we aren't the only ones pushing back -- the supplier world is changing."

Steel is among U.S. auto makers' biggest purchasing headaches. Surviving North American steel suppliers have already had their financial crises and taken their medicine. More than 40 steelmakers in the U.S. filed for bankruptcy between 2000 and 2003. The number of North American steelmakers now competing for auto-maker business is down to a half-dozen. Some can operate profitably at less than full capacity, and simply walk away from car companies if price pressure is too great.

"Steel companies are getting larger and can have different-type discussions with the auto makers," says Donald Pether, chairman of Dofasco Inc., a large Canadian steelmaker. "There is a better balance of power than there has been in the past."

Dofasco recently became part of Luxembourg-based Arcelor Mittal, the world's largest producer, which turns out about 10% of global steel output. U.S. auto makers got used to pitting one steelmaker against another and capitalizing on boom and bust steel cycles, but have no such clout when facing steelmakers stronger than they are. The stock-market value of Arcelor Mittal, at $70.4 billion, is more than four times Ford's.

Car makers used to prefer three-year supply agreements. Now steelmakers, not wanting to be locked in when price prospects are good, often won't agree to contracts longer than 18 months. Deals as short as three and six months aren't rare.

An executive at the American Iron and Steel Institute, Ron Krupitzer, who once worked for Chrysler, recalls when it maintained a list of its steel suppliers that graded each on quality, cost, delivery and reliability. In those days, "the car guys did have the upper hand," he says. Today's fewer suppliers "can hold their own better in negotiations than before, when there were 12 guys waiting in the lobby anxious to sell steel product."

Remaining steelmakers are more focused on profits and less on maintaining production volumes. A product of consolidation by financial engineers, the companies are less likely to be run by old-fashioned executives who came up from the mill, and were sometimes more interested in making steel than making money.

Steel Dynamics in Fort Wayne, Ind., got into a wrangle with GM in 2004 when, thanks to global forces such as China's boom, steel prices soared. GM accused Steel Dynamics of violating an understanding by charging higher prices. Steel Dynamics contended it was free to do so because it and GM had only an informal supply agreement. The result was litigation, which went the steelmaker's way at the trial level. GM later dropped its suit.

A GM spokeswoman, Deborah Silverman, said, "This dispute with this one supplier probably was not a sea change in the way we do business here.... Our position is when suppliers have contracts with us, those contracts are legally binding."

Now Steel Dynamics has shifted its focus more toward products such as coated and painted steel for construction. Only 15% of its output now goes to make cars, down from 30% before the spat with GM. Steel Dynamics sells auto steel mainly through distributors now, and says it doesn't worry much anymore about its relationship to the Big Three.

GM estimates its steel costs will rise nearly $1 billion this year. Ford sees a $1 billion rise in its costs for commodities including metal and plastic. Though car makers "had a lot of leverage historically," says Steel Dynamics spokesman Fred Warner, "we're just not as tied to the auto industry as we once were."

Navistar evidently isn't either. The Warrenville, Ill., engine and heavy-truck maker has been through extensive restructuring, going back decades to when it was formed out of the old International Harvester. Navistar has long provided diesel engines for Ford's Super Duty F-250 and F-350 pickups, which are among Ford's few profitable products. Navistar brought out a new 6.4-liter engine in January, asking $7,600 each.

Ford thought the price should be $6,100. Ford also claimed the previous model had such problems that Navistar ought to pay some $1 billion to help defray repair costs that Ford bore under warranties. In mid-January, Ford began debiting Navistar's account by tens of millions of dollars, and in January filed suit.

The result was a blunt letter from the parts supplier. Ford, the letter said, was demanding that Navistar sell engines at a loss "to accommodate Ford's desire for higher profits." The letter from Navistar's general counsel then effectively served notice that the supplier was prepared to fire its biggest customer. Alleging that "we were the victim of Ford's heavy hand," the letter said, "That is now over." Four days later, on Feb. 23, Navistar stopped shipping diesel engines to Ford.

A temporary restraining order obtained by Ford got the engines coming a few days later. Ford then agreed on March 9 to reimburse Navistar for part of the debited funds and to pay Navistar's asking price -- $1,500 more per engine than Ford wants to pay -- until Michigan state-court litigation between the two is settled. The price setback for Ford helped prompt Bear Stearns to lower its earnings estimates for the company.

Navistar CEO Daniel Ustian declines to comment. But in a mid-January speech a few blocks from Ford headquarters in Dearborn, Mich., he told an industry audience that auto makers face "a new reality" in which "the math must benefit all of us."

Attempting to regain the upper hand, auto makers are trying some unprecedented moves. With steel, Ford and others have thrown their support behind the idea of futures trading of the metal on an exchange, as a way to hedge price risk.

In October, auto makers joined forces to lobby the International Trade Commission to remove barriers on galvanized steel. The ITC did remove some, but steel-industry executives say the move won't make steel cheaper. So far, the greatest result of the car-industry moves has been to ignite heated exchanges of rhetoric between auto and supplier executives.