Navistar Officially Buying GM MD Trucks

http://www.reuters.com/article/bondsNews/idUSWNAS506220071220

DETROIT, Dec 20 (Reuters) - General Motors Corp (GM.N: Quote, Profile, Research) said on Thursday that it has reached a tentative agreement to sell its medium-duty truck business to Navistar International Corp (NAVZ.PK: Quote, Profile, Research).

GM sells medium-duty trucks under the nameplates Kodiak, TopKick and Isuzu T-Series. The automaker made 59,000 medium-duty trucks in 2006, representing nearly 12 percent of the market.

The deal would be completed in 2008.

Beat me to it ;)

This line should go to Springfield according to the contract correct?

I know they haven't officially said yet.

I hope they make the trucks better looking. GM MDs are ugly compared to Ford and International.

More info:

December 20, 2007
GM AND NAVISTAR REACH TENTATIVE AGREEMENT ON
MEDIUM DUTY TRUCK BUSINESS
General Motors Corporation and International Truck and Engine Corporation 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 today.
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.
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 our strengths in commercial
trucks and engines, and advance our strategy to build scale and reduce costs.
Troy Clarke, president of GM North America, said, “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. 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,” said Dan Ustian, chairman, president
and CEO. “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.”
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 motor homes and step vans, and
MaxxForce® brand engines.
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 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.
Please refer all media inquiries to:
Roy Wiley at 630-753-2627 or Jillane Kleinschmidt at 630-753-2462
Why is this good for Navistar?
Overall, this is an opportunity to leverage our expertise in the truck business to strengthen the GMC,
Chevrolet and International product lines and businesses, and it supports our company strategy.
 Growth – it would add $1.5+ billion to our top line revenues, helping to put us closer to our $15
Billion goal
 Competitive Cost Structure – the scale and synergies would improve operating efficiencies and
utilization of our engineering and manufacturing resources
 Great Products – we would add GM’s established products, brands, service parts and a network of
550 dealer locations
 People – it would present career opportunities for Navistar employees and enable the organization
to learn and build upon our commercial truck experience
Why now?
The business is on the market now. GM is in the midst of a turnaround plan to focus on cars and light
trucks and has decided to sell some pieces of its business, including the medium-truck business. GM
has an obligation to provide these product lines to dealers and needs to find a best-in-class supplier for
its dealers. For Navistar, it would fit well with our strategy to grow our business by leveraging the
strengths of the GM and International product lines and gaining scale to improve the cost structure for
both.
Is this like the Blue Diamond Joint Venture?
No, Blue Diamond is a joint venture where Ford and International run their businesses separately. This
would be a purchase where Navistar runs the GMC/Chevrolet truck business with GM retaining certain
rights and obligations. That means Navistar would own the intellectual property, do the design,
engineering, purchasing, manufacturing, marketing, sales, service, etc.
Why has the company not yet communicated where the GM products would be moved?
As you read in the news release, this is just a tentative agreement. When the definitive agreement is
executed, the company will announce where various elements of assembly will be introduced. In
addition, the company is in important discussions with state and local governments to finalize their
financial incentive commitments and support.
Would this lead to more volume for MaxxForce engines?
Future powertrain plans for the GM trucks are under development and yet to be determined. GM
currently offers gas engines and Isuzu, Duramax and Caterpillar diesel engines. Growth of the
International truck line-up would lead to increased volume for MaxxForce engines.
How is Navistar Parts involved?
Navistar Parts Group would offer parts sales and service support to GM truck and parts customers using
its current operations and systems. This would increase operational scale and parts revenue.
What’s next?
We will move forward with due diligence, regulatory review and negotiating a definitive agreement. A
new vehicle center team will be formed and they will continue to develop plans for how we would
transition engineering, manufacturing, purchasing, distribution, service, parts and all of the related
systems. The goal would be a seamless transition for GMC and Chevy truck customers.

So GM will no longer be producing the medium duty trucks that are still going to be sold with GMC/Chevy badging/styling/interior/etc?? That's kinda crazy. What if navistar lets quality slip and it reflects poorly on GM's half ton line?

So GM will no longer be producing the medium duty trucks that are still going to be sold with GMC/Chevy badging/styling/interior/etc?? That's kinda crazy.

Not really. No different than Volvo trucks (owned by Volvo group) vs. Volvo cars (Ford).

What if navistar lets quality slip and it reflects poorly on GM's half ton line?

That's kind of an off the wall question. Does the quality of Volvo trucks affect volvo cars? Navistar is the market share leader in this segment, so their abilities should be sufficient to maintain a good product.

So GM will no longer be producing the medium duty trucks that are still going to be sold with GMC/Chevy badging/styling/interior/etc?? That's kinda crazy. What if navistar lets quality slip and it reflects poorly on GM's half ton line?

I would guess they'd continue to use the GM chassis and GM van-based cab for the rest of this generation's life (which may now be shortened), then switch over to a Navistar-based cab and chassis for the next generation. All the while using GM badging sold through GM dealers.

I don't think too many people pay attention to the medium truck segment so if there's drop in quality, it probably won't matter.

That's kind of an off the wall question. Does the quality of Volvo trucks affect volvo cars? Navistar is the market share leader in this segment, so their abilities should be sufficient to maintain a good product.

:think: Your reasoning/example is pretty off the wall.


This is a Volvo truck made by Volvo group
http://www.swtrucks.com/images/photo.jpg

This is the closest thing to a truck made under the Volvo name by Ford:
http://www.auto123.com/ArtImages/64184/alt.jpg

I think it's fairly obvious that people don't do much association between picture A and picture B. Sold through completely separate dealer networks, exterior/interior looks are nothing even remotely alike, completely different names other than the brand, and very different purposes and target markets.
People associate that Volvo truck with Volvo SUV quality like they associate Mitsubishi cars with Mitsubishi TV quality... which is to say hardly at all.


On the flip side this is going to be a Navistar produced 2500HD
http://z.about.com/d/alternativefuels/1/7/7/1/-/-/07_GMC_2500HD3_4front.jpg

This is going to be a GM-produced 1500
http://www.netlook.com/auto/USFLTAM/pic/11986323/AT10352343-640px-p1-20071004.jpg

Sold through the same dealerships with extremely similar looking exteriors, nearly identical names, very similar purposes and target markets, and almost entirely identical interior designs.
The quality of the medium duty trucks reflects heavily on the quality of the light duty trucks.

On the flip side this is going to be a Navistar produced 2500HD
http://z.about.com/d/alternativefuels/1/7/7/1/-/-/07_GMC_2500HD3_4front.jpg


Navistar only bought the medium duty trucks business, e.g. dump trucks, delivery trucks, etc. Class 4 to 8. Not pickups.

Navistar only bought the medium duty trucks business, e.g. dump trucks, delivery trucks, etc. Class 4 to 8. Not pickups.

OK... thanks for the clarification.

I thought medium duty meant 3/4 ton... it's pretty confusing that they use the term heavy duty on those trucks and these commercial trucks are called medium duty?

Still, I think GM's commercial truck division reflects moreso on their 1/2 to 1 ton trucks than Volvo's semis reflect on their car-based SUVs.:p

These are examples of the "medium" duty trucks that are being sold. Not the pickups. :)

http://www.irancar.com/images/Gallery-larg-1024-768/Chevrolet/chevrolet_kodiak_2003_03_m.jpg

OK... thanks for the clarification.

I thought medium duty meant 3/4 ton... it's pretty confusing that they use the term heavy duty on those trucks and these commercial trucks are called medium duty?

Still, I think GM's commercial truck division reflects moreso on their 1/2 to 1 ton trucks than Volvo's semis reflect on their car-based SUVs.:p

In the larger scheme of things, all pickups are light duty. The "heavy duty" moniker on pickups is just a consumer market differentiator.

I agree that GM's commercial trucks might have a bit more influence on the consumer market than Volvo's, but it's still very, very low. About the only people that would care, would know enough to realize that Navistar is now making the GM medium duty trucks and the two are no longer connected.

Not really. No different than Volvo trucks (owned by Volvo group) vs. Volvo cars (Ford).


Funny that you mention Volvo trucks - they ended up with GMC's heavy (Class 7/8) business after picking up the White/GMC merger in the 90s. Ah - those old Jimmys were some serious trucks.

I'm sad to see GMC go from a serious maker of medium and heavy trucks to a seller of luxury pickups and crossover vehicles, but I'm not surprised that it went down this way. Oh well.

BTW - all Class 1 (half-ton), 2 (3/4-ton) and 3 (one-ton) trucks are "light". The EPA refers to the Class 2 and 3 trucks as "heavy-duty light trucks". Classes 4-6 are "medium", and Class 8 are "heavy". Class 7 falls into "medium" or "heavy" depending on who you ask.

The heavy duty truck market has seen quite the changes in the past few decades. Off the top of my head:

- GM sold its HD Diesel unit, Detroit Diesel, to Roger Penske. Penske turns it around and later sells it to Mercedes. Detroit Diesel revolutionized the industry back in the 1940s with its lightweight modular two-stroke Diesels, and once held one-third of the on-highway tractor engine business, and probably a lot more of the off-road (construction) market. The engines were based on cylinders of 71 cubic inches displacement each and required a roots-type blower to fill & scavenge the cylinders. Blowers were sized according to the number of cylinders, and this is where you get 4-71, 6-71, 8-71, etc. blowers that folks put on their hotrods. Like many of their successful divisions, GM let it whither until it held just 3% of the market before they sold to Penske.

- As Eric mentioned, GM merged its HD trucks with White to become WhiteGMC, then is later sold to Volvo

- GM sold Allison Transmission to Cerberus

- Mack was sold to Renault, and is now owned by Volvo

- Western Star was bought by Mercedes

- Ford's HD truck business was bought by Mercedes and renamed Sterling (though Ford still has their own medium duty trucks)

- Going back further (since it's related to GM), GM once owned a top-tier off-road construction equipment division known as Euclid (this is where "Yuke" dump trucks came from). The US government made GM sell Euclid for competition concerns, so GM just sold them and started building almost the same vehicles under the Terex name. In addition to off-road haulers, they also made front-end loaders and other construction equipment. GM eventually let Terex whither and it went through a whole mess of ownership changes (I think Hitachi was the latest).

Cerberus didn't buy Allison.

Allison was bought by ONYX Corp and The Carlyle Group. :)

Volvo / Mack are one, as you mentioned. Also, Freightliner / Western Star / Sterling are one, under the Daimler umbrella.

There are various heavy coachbuilders mixed in with the big OEMs as well.

Allison was bought by ONYX Corp and The Carlyle Group. :)

Ah, thanks, wrong private equity group :o. In my mind I was thinking that Cerberus now owns part of a GM division as well as Chrysler, but of course it's GMAC that they own the majority share of.

Now that you mention it, GM's bus business was sold to MCI in the 1980s.

It's sad to think of it ... GM used to dominate in almost every market that dealt with transportation, including owning pieces of various airlines. Now they've retrenched into just automobiles :(

I blame the government for allowing foreign competitors in the market.