Navistar to buy GM’s medium-duty truck business

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General Motors Corp. and International Truck and Engine Corp., the principal operating subsidiary of Navistar International Corp., have entered into a non-binding memorandum of understanding under which Navistar would purchase certain assets, intellectual property and distribution rights for GM’s medium-duty truck business, the two companies announced Dec. 20.

As proposed, Navistar would acquire GM’s medium-duty truck business, which includes assets and intellectual property rights to manufacture GMC and Chevrolet brand vehicles in the Class 4-8 gross vehicle weight range. It also includes purchase of the related service parts business. Navistar would sell a competitive line of Chevrolet and GMC vehicles and service parts through GM’s proprietary dealer network in the United States and Canada.

Navistar would add the GMC TopKick and Chevrolet Kodiak truck brands to its growing portfolio of brands, which currently includes International brand trucks and tractors, IC brand buses, Workhorse brand chassis for motorhomes and step vans, and MaxxForce brand engines. There is a possibility that TopKicks and Kodiaks eventually could be powered by International engines, Navistar officials said during a teleconference this morning.

When a deal is definitively concluded, production of the vehicles would move from GM’s plant in Flint, Mich., to a Navistar facility to be named. GM would retain ownership of its Flint plant and continue to build other products at the facility. GM will continue its medium-duty truck relationship with Isuzu to market W-Series trucks through GM’s medium-duty dealer network.

The deal, terms of which were not announced, is expected to close in 2008 subject to completion of satisfactory due diligence, the negotiation of a definitive purchase agreement, customary regulatory clearance and board approval. Upon closing, transition of the business could take several months to conclude.

The agreement is another step in GM’s plan to focus on designing, manufacturing and selling cars and light trucks globally. The deal would leverage Navistar’s strengths in commercial trucks and engines, and advance its strategy to build scale and reduce costs.

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“Navistar’s expertise in building International brand commercial trucks and its track record in the medium-duty segment makes them an excellent choice to acquire and continue growing the business,” says Troy Clarke, president of GM North America. “We intend to work closely with Navistar to make this transition seamless to our dealers and customers.”

“This is another example of how we’re strategically growing our business for trucks, engines and parts, building scale and reducing costs,” says Daniel Ustian, chairman, president and chief executive officer of Warrenville, Ill.-based Navistar International Corp. “We are proud to incorporate the GM truck brands into our portfolio, and will utilize the scale to build on the success of both the International and GM product lines and their respective distribution networks.”