GM to sell medium-duty truck unit to Navistar

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DETROIT (Reuters) - General Motors Corp <GM.N> has reached a tentative agreement to sell its medium-duty truck business to Navistar International Corp <NAVZ.PK>, the two companies said on Thursday.

By Poornima Gupta

DETROIT (Reuters) - General Motors Corp <GM.N> has reached a tentative agreement to sell its medium-duty truck business to Navistar International Corp <NAVZ.PK>, the two companies said on Thursday.

GM sells medium-duty trucks under the nameplates Kodiak, TopKick and Isuzu T-Series.

The deal, terms of which were not disclosed, is expected to be completed in 2008.

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The move to sell the unit would be consistent with GM's strategy as it tries to focus more on its core business of making cars and sport utility vehicles.

Under the deal, Navistar would purchase certain assets, intellectual property rights to manufacture GMC and Chevrolet brand vehicles in the class 4-8 gross vehicle weight range and distribution rights for GM's medium-duty truck unit.

It also includes purchase of the related service parts business.

For Navistar, which already produces trucks in the medium-duty market, a deal with GM would provide additional scale and permit the company to run its existing factories more efficiently.

The deal could also add as much as 50 cents a year to Navistar's earnings per share, according to Peter Nesvold, an analyst at Bear Stearns.

The transaction could have an additional benefit: giving Navistar "an opportunity ... to sell larger displacement engines into GM eventually," Nesvold said.

He added that would help Navistar, which supplies pickup truck engines to Ford Motor Co <F.N> but is embroiled in a bitter dispute with the automaker, to "plan for 'life after Ford' should that relationship sour further."

When the deal is concluded, production of the vehicles would move from GM's plant in Flint, Michigan, to a Navistar facility to be named, the two companies said.

GM said it would retain ownership of its Flint plant and continue to build other products at the facility.

GM will also continue its medium-duty truck relationship with Isuzu Motors Ltd <7202.T> to market W- Series trucks through GM's medium-duty dealer network.

GM's previous asset sales include Allison Transmission to buyout firms Carlyle Group and Onex Corp., 51 percent of its finance unit to a group led by Cerberus Capital Management LP, and stakes in Suzuki Motor Corp <7269.T> , Isuzu Motors Ltd and Fuji Heavy Industries Ltd <7270.T>.

(Additional reporting by James Kelleher; editing by Steve Orlofsky and Dave Zimmerman)