GM's re-focus continues: sells mid-size truck unit

Posted Dec 20th 2007 1:19PM by Joseph Lazzaro
Filed under: Deals, Competitive Strategy, General Motors (GM)

General Motors (NYSE: GM) said Thursday it will sell its mid-size truck unit, which built about 40,800 vehicles in 2006, to Navistar International. Financial terms were not disclosed.

GM's shares fell 20 cents to $26.46 in Thursday midday trading.

GM said the agreement constitutes another step in the company's plan to focus on designing, manufacturing and selling cars and light trucks around the world. GM added that the deal would leverage Navistar's strengths in commercial trucks and engines, enhance its economies of scale and lower costs.

Good decision

Analyst C. Leonard Bauer, formerly of Prudential, said he likes the sound of the Navistar deal.

"This will enable GM to allocate more resources on its core: cars and light trucks," Bauer said. "I like the sale to Navistar in that it gets GM out of a space that did not represent a big gainer. GM has seen the future, and for them it's not in manufacturing mid-size trucks."

GM evaluation

However, Bauer would not be a buyer of GM's shares right now. Bauer said he does not currently own GM shares.

"GM is about half-way there, regarding the turnaround. They've done a good job on legacy costs and on re-focusing operations, but now we need to see the new roll-outs, at least two or three innovative, in-demand cars," Bauer said. "We also have to be concerned about the economic headwinds in 2008, a possible U.S. economic slowdown and high gas prices, which would certainly delay GM's recovery."

Bauer said he will review GM's Q1 and Q2 2008 earnings reports before considering a purchase of GM, adding that he still sees the stock "testing $20 or perhaps even $15 in 2008."

Tags: auto sector, auto stocks, cars, diesel prices, gasoline prices, General Motors, GM, inthenews, light trucks, LightTrucks, medium trucks, mid-size trucks, mpg, Navistar, SUVs, trucks