DETROIT (AP) — General Motors Corp. has tentatively agreed to sell its medium-duty truck business to a unit of truck maker Navistar International Corp., the companies announced Thursday. No terms were disclosed, however, and GM said more work must be done on details of the deal.
The sale, which involves vehicles used as tow trucks, for example, would be part of GM's plan to focus on building and selling passenger cars and light trucks, such as pickup trucks. For Navistar, which has faced years of accounting problems, the agreement would advance its strategy to build scale and cut costs.
International Truck and Engine Corp., the principal operating subsidiary of Warrenville, Ill.-based Navistar, and GM said they have entered into a non-binding memorandum of understanding about a sale.
Financial details of the deal, which is expected to close next year, weren't being released. GM spokesman Rob Minton said the agreement could lead to a sale, but more work needs to be done on specifics.
Troy Clarke, president of GM North America, said Navistar's experience in building International brand commercial trucks makes the company an ''excellent choice'' to buy GM's medium-duty business.
''We intend to work closely with Navistar to make this transition seamless to our dealers and customers,'' Clarke said in a statement.
Daniel C. Ustian, Navistar's chairman, president and CEO, said: ''We ... will utilize the scale to build on the success of both the International and GM product lines and their respective distribution networks.''
Navistar said in October it was in talks to buy Detroit-based GM's medium-duty truck business.
Under the deal, Navistar would purchase certain assets, intellectual property and rights to manufacture medium-duty GMC and Chevrolet brand trucks, such as dump trucks, tow trucks and utility trucks.
It also includes purchase of the related service parts business, the companies said. Navistar would sell the vehicles and parts for service through GM's dealer network in the U.S. and Canada.
GM doesn't break out financial details for its medium-duty truck business, but Minton said it typically sells about 30,000 to 40,000 vehicles a year in the U.S. and Canada. Under the agreement, Navistar would add the GMC TopKick and Chevrolet Kodiak truck brands to its lineup.
When a deal is concluded, TopKick and Kodiak production would move from a GM plant in Flint, Mich., to a Navistar plant. GM would keep the Flint plant and continue to build other products at the facility.
Minton said he couldn't say what might be built at the Flint plant because GM doesn't discuss product plans.
The agreement is subject to negotiation of a definitive purchase agreement, regulatory clearance and board approval. Following a closing, transition of the business could take several months to conclude.
GM shares fell 11 cents to $26.55 in morning trading Thursday.
Earlier this month, Navistar restated its earnings for fiscal 2005, reporting a $139 million profit in what it called a milestone toward catching up on long-overdue required filings with the Securities and Exchange Commission.
Navistar also formally filed results for 2003 and 2004, showing a combined $377 million loss. Until October, the company had not reported financial results for more than two years because of accounting problems.
Navistar was delisted by the New York Stock Exchange in February.