Marvel Studios is already hard at work on its upcoming sequel to this summer’s box office hit “Iron Man” and has signed on Don Cheadle to replace Terrence Howard as Robert Downey Jr’s best friend and ally in the film.

Terrence Howard portrayed Jim Rhodes, best friend to Robert Downey Jr’s Tony Stark/Iron Man character and hero on his own but the actor will not appear in the sequel. According to the Hollywood Reporter, while Marvel Comics has not made any comments regarding the situation, there were differences between the actor and the studio over financial matters and an agreement could not be reached. There were other reasons as well apparently, not specified though.

Marvel thus approached Don Cheadle for the part, which will, obviously, now take on another direction. The same source adds that the Rhodes character may now have a larger pat in the sequel.

Jon Favreau is returning as director while Justin Theroux (“Tropic Thunder”) is picking up the pen to write the screenplay.

Downey is also returning as the title character and we can all look forward to another great performance from the actor. His turn as a billionaire industrialist/playboy whose reawakened conscience inspires him to turn into a crime-fighting hero earned excellent reviews from film critics and became a career rejuvenation for Downey.

Gwyneth Paltrow, who breathed finesse and intelligence into her character, Pepper Potts, assistant and love interest to Stark, is also expected to return.

“Iron Man 2” is scheduled for a May 7, 2010 release.

Don Cheadle is currently filming Antoine Fuqua’s “Brooklyn’s Finest” alongside Richard Gere and Ethan Hawke. He will next be seen in DreamWorks’ “Hotel for Dogs.”

Downey is busy donning Sherlock Holmes’ trademark cap and pipe in Guy Ritchie’s upcoming big screen adaptation of the Arthur Conan Doyle universe.