GM, Navistar Medium-Duty Deal Expires
Aug 21, 2008 1:34 PM
Due to significant marketplace and economic changes, GM and Navistar have decided not to renew the memorandum of understanding to purchase GM’s medium-duty truck business, which has expired.
GM will continue to run the medium duty business as it has in the past, including providing sales, service and marketing support to GM dealers for its medium duty trucks.
Navistar spokesman Roy Wiley told The Wall Street Journal that the two parties will continue to discuss a deal, but for now GM will continue operating and owning its medium-duty truck business, which is based in Flint, Mich.
"We'll look at other options for the business," GM spokeswoman Renee Rashid- Merem said. "For businesses like this one, there's still a certain segment of customers that are going to need the product and there are still companies that are in it. It's just a matter of finding a solution that works. It's time intensive."
GM's non-binding deal with Navistar was announced in December, with 30,000 to 40,000 medium-duty trucks to be produced by Navistar and sold under GM's Chevrolet and GMC brand names. But GM’s medium- duty sales fell 20% through July compared with the same period a year ago.
The Journal said that the decision may slow Navistar’s efforts to tap into new revenue sources during the slowdown in commercial truck sales. As a truck builder and engine supplier, it relies on the proliferation of the truck business to keep profits on track.
The Journal said that while GM is the No.1 light-truck maker in the U.S., it would like to exit the medium-duty truck market because it is capital-intensive and relatively low margin compared to light-duty truck sales. GM’s medium-duty assembly line in Flint, Michigan, turns out vehicles such as tow trucks and buses. Navistar is the leading producer of those vehicles, and wanted to acquire the GM business so it could expand its leadership in that segment.
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