Filed under: Deals, Competitive strategy, General Motors (GM)
General Motors (NYSE: GM) stated 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 stated 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: automobiles and light trucks,” Bauer said. “I like the sale to Navistar in that it gets GM out of a space that didn’t represent a huge 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 stated 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 stated. “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’ll review GM’s Q1 and Q2 2008 earnings reports before considering a buy of GM, adding that he still sees the stock “testing $20 or perhaps even $15 in 2008.”
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