GM NEAR TO AGREEMENT TO SELL TRUCK UNIT TO NAVSTAR

20 Dec 07. Bloomberg reported today that General Motors Corp., the world’s largest automaker, may announce an agreement to sell a medium- duty truck unit to Navistar International Corp. as soon as today, people familiar with the deal said.

Navistar, the fourth-biggest truckmaker, said in October that it was negotiating to buy the unit, which Bear Stearns Cos. analysts value at $500m. GM has said it might sell the Flint, Michigan-based business to focus on making a profit from cars and light trucks.

A sale would add to the $21bn in assets that GM has sold in the past three years to pay operating costs as it posted net losses of $50bn, including a $39bn charge last quarter for tax accounting changes. In August, GM sold Allison Transmission to buyout firms Carlyle Group and Onex Corp. for $5.6bn.

“They might as well monetize one more non-strategic asset to fund the turnaround,” said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee. “GM doesn’t have a liquidity problem, but adding more coins to the coffers is never a bad thing.”

GM spokeswoman Melisa Tezanos wouldn’t comment, and Navistar spokesman Roy Wiley declined to confirm the timing of any accord. Navistar said in October that if it reached agreement on the GM unit, Navistar would sell Chevrolet and GMC medium-duty trucks through the automaker’s dealer network in the U.S. and Canada.

GM fell 27 cents to $26.66 yesterday in New York Stock Exchange composite trading. Navistar gained $3.75, or 7.5 percent, to $53.80 in over-the-counter trading.

Dump Trucks, Delivery Vehicles

The medium-duty truck unit last year built about 40,800 Chevrolet Kodiak, GMC TopKick and Isuzu T-Series models, for uses such as dump trucks and delivery vehicles.

GM, based in Detroit, doesn’t break out the unit’s financial results. Bear Stearns analyst Peter Nesvold said in May that the business had annual revenue of about $2bn and estimated its value at $450m to $500m.

The analyst also said then that if Navistar were the buyer, the increased production could add 50 cents to $1 a share to the Warrenville, Illinois-based company’s earnings. GM’s asset sales included 51 percent of its finance unit to a group led by Cerberus Capital Management LP, raising $13 billion over three years, and stakes in Suzuki Motor Corp., Isuzu Motors Ltd. and Fuji Heavy Industries Ltd., raising $3bn.

The automaker’s cash, marketable securities and money available from a retiree health-care fund rose to $30bn as of Sept. 30, from $27.2bn at the end of June, with the gain from selling the Allison unit.

Comment: This announcement comes hot on the heels of the announcement of the $1.1bn order for MRAPS won by International yesterday. Whilst strengthening NAVSTAR to a very powerful position in the world truck market it will also give the company huge leverage in the military market with the GM brands which will add strength to military truck sales and the MXT range in particular. (See: BATTLESPACE UPDATE Vol.9 ISSUE 46, 22 Nov 2007, BATTLESPACE TAKES THE INTERNATIONAL MXT-MV FOR A DRIVE).

As we said in that piece, International has come from nowhere to a very strong military business. This move will further strengthen this position and increase overseas sales as we understand that the MXT may also be badged with the GM marque. The comment is worth repition.

‘Seasoned BATTLESPACE readers will not have seen any coverage of the International range of military vehicles prior to our visit to their Stand at AUSA in 2005 when Rob Puhalovich gave BATTLESPACE Editor an overview of the enormous growth in military business. The company’s products had come to the eye of the Editor and our contributor John Reed who has a history of advising U.S. truck manufactures and driving the ubiquitous Diamond ‘T