GM could sell medium-duty operations to Navistar

May 16, 2007
General Motors is in talks to divest its medium-duty truck line to International Truck and Engine in a bid to focus on its core car and light truck business

General Motors is in talks to sell its medium-duty truck line to International Truck and Engine in a bid to focus on its core car and light truck business, reported The Flint Journal.

Although neither GM nor International would confirm the report, a UAW representative told The Flint Journal he is aware of conversations between GM and International’s parent company Navistar.

Investment banking firm Bear Stearns noted in January that a medium-duty divesture would be a tempting proposition for the auto giant.

“A sale of GM’s medium-duty facility in Flint [is] both logical and increasingly likely as GM turns its focus to just cars and light trucks,” stated Bear Stearns.

Of the OEMs that could be prospective buyers of the GM commercial vehicle operation, Bear Stearns said International would strategically be the best fit “should [its relationship with Ford] sour further.” Bear Stearns was referring to Navistar’s ongoing dispute with Ford over payment, which prompted International to halt deliveries of its diesel engines that power Ford Super Duty pickups.

Read International engines will be delivered to Ford—for now.

Bear Stearns speculated on a GM medium-duty divesture when the company announced it’s open to selling its lucrative Allison operation, a dominant player in the transmission market for medium- and heavy-duty trucks.

Read GM considers selling Allison.

The Flint Journal reported that the potential sale would shift volumes from the Flint facility to International’s operation in the Midwest. Bear Stearns noted that such a move would boost Navistar’s capacity utilization.

Analyst Chris Brady, president of Commercial Motor Vehicle Consulting, said that GM’s medium-duty lineup is not so complementary to Navistar’s.

“I don’t see what International stands to gain since the GM product line is a conventional cab,” Brady told FleetOwner. “Navistar has a conventional product.”

Volvo AB, which lacks a medium-duty product in North America would be a better fit from a product standpoint, Brady said. In February, Volvo AB reported its acquisition of 96% of Nissan Diesel shares, a move that boosted its presence in Asia as well as its global medium-duty volume to about 38,000 units annually. This volume is still a far cry from 126,000 unit volume of DaimlerChrysler and 90,000 by GM-Isuzu based on 2005 data. Read AB Volvo makes $1.1 billion Nissan Diesel bid.

But GM is certain to sell its medium-duty operation when it receives the right offer, Brady noted.

“It’s a small part of their overall business and competition is increasing in the medium-duty segment,” Brady said. “The investment needed to make the [medium-duty] product line competitive will probably increase and they will need all the resources they can get to turn around their automotive business. GM is looking at the competition increasing and asking themselves where do they want to spend their resources— in commercial vehicle or their automotive business. The choice is obvious.”

To comment on this article, write to Terrence Nguyen at [email protected].

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Terrence Nguyen

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