Navistar, GM drop deal for truck division

The deal had been seen as a way for GM to move forward on its plans to focus on building and selling passenger cars and pickup trucks, while allowing Navistar to build scale and cut costs.

The Associated Press

8/21/2008

WARRENVILLE, Ill. — General Motors Corp. and Navistar International Corp. said Wednesday that they have dropped immediate plans for GM to sell its medium-duty truck business to Navistar, citing market and economic changes.

GM and the Warrenville, Ill.-based commercial truck maker both said they decided against renewing the sale's memorandum of understanding, which has expired.

The companies said that Detroit-based GM will keep running the business, while also continuing to review strategic options for it, including continued discussions with Navistar.

The companies originally said in December that they had reached a tentative agreement for the sale. Financial details were never released.

The deal had been seen as a way for GM to move forward on its plans to focus on building and selling passenger cars and pickup trucks, while allowing Navistar to build scale and cut costs.

But in the months since the deal was reached, the downturn in the U.S. economy and high gas prices have hit sales of commercial vehicles hard.

Earlier this month, Navistar acknowledged that the weak economy has prompted commercial truck owners to defer buying or leasing new vehicles, but backed its sales guidance for the year.