Navistar Eyes GM Medium-Duty Truck Business
October 29, 2007

By Bill Visnic

Navistar International Corp. has disclosed it is “in discussions” with General Motors Corp. regarding a deal to buy GM’s medium-duty commercial truck operations.

A GM spokesman would not comment on Navistar’s release in financial filings, saying “We said before that we’re looking at options for the medium-duty [commercial truck] business.” He adds that GM is studying its strategic options but, “we’re not ready to announce anything yet.”

Navistar is the widely known holding company for such brands as International trucks and MaxxForce diesel engines for commercial trucks. Earlier this year, Navistar also was at the center of a contentious supplier relationship with Ford Motor Co., for whom it currently builds the PowerStroke V8 diesel for Ford’s Super Duty pickup trucks.

GM’s medium-duty truck portfolio is comprised primarily of the Chevrolet Kodiak and GMC Topkick in the 4500 to 8500 classes, as well as the W- and T-Series trucks that are used for a wide variety of commercial applications.

The Kodiak/Topkick in 4500/5500 configurations are built at a GM assembly plant in Flint, Michigan. Those models compete mainly with the Ford Super Duty, says GM. The larger 6500/7500/8500 series also are built in Flint, but compete with trucks marketed by Freightliner, Sterling and Ford, not to mention Navistar’s International.

Navistar says it is seeking to acquire the rights to manufacture GMC and Chevrolet-brand trucks, but it appears any agreement definitely would retain the Chevrolet and GMC brands.

Navistar’s release also says, “Under this proposal, Navistar would sell a competitive line of Chevrolet and GMC medium trucks and service parts through GM’s proprietary dealer network in the United States and Canada.”

No time frame is given, and the probability of continued manufacturing of the trucks at GM’s existing Pontiac, Michigan, site, if Navistar acquires GM’s medium-duty truck business, is unaddressed. GM also assembles Chevrolet and GMC light-duty pickups at the Pontiac site, and recently agreed with its labor union, the United Auto Workers, to continue building light- and medium-duty trucks at the site beyond 2012.

“An agreement with GM could become an important part of our growth strategy as we leverage our core strengths in commercial trucks and engines,” says Daniel C. Ustian, Navistar’s chairman, president and CEO. “General Motors would entrust Navistar to support two of its most important brands because of the depth of our experience and success in the medium-truck business.”

For Navistar, the deal could serve a secondary purpose: securing a considerable amount of incremental volume for its engine-building business in what is a viciously competitive market. Currently, the Kodiak/Topkick in 4500/5500 configuration use either GM’s Vortec 8.1-liter gasoline V8 or Duramax 6.6-liter diesel V8 –- but the larger trucks use a variety of powerplants, including diesels sourced from Navistar competitors Isuzu and Caterpillar.

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