GM Sticks with Truck Dealers

Detroit — A reassure-the-dealers tour went well, say collaborating executives from General Motors Corp. and truck maker Navistar International Corp., which plans to begin making medium-duty trucks for GM soon.

Executives from both companies are back from a recent 6-day national tour in which they met with many of GM's medium-duty truck dealers, answered their questions and explained the impending transfer of assets and production.

“Until the deal closes, it is business as usual for dealers and customers,” says Mark A. Karney, GM's marketing director-commercial vans and medium-duty trucks. “That was important to our dealers.”

GM is selling its Flint-based medium-duty truck business to Navistar. Barring unexpected snags, the deal will be closed late in the second quarter, and Navistar in the fourth quarter will begin making Chevrolet TopKicks and GMC Kodiaks at a yet-to-be-announced plant.

Medium-duty production at a GM truck plant in Flint will end. But the plant will continue to make light-duty pickups.

GM is selling its medium-duty truck business to raise money, concentrate more on its light-duty vehicle operations and turn its medium-truck operation over to an actual truck company.

“GM is great at high-volume light trucks, not so great with medium-duty trucks that were really an adjunct operation for them,” says Dave Tarrant Navistar's general manager-new business development.

“Commercial and industrial trucks make up our core business,” he says. “We are a market leader in medium-duty.”

GM will retain the sales and service aspects of its franchised dealership network of truck retailers.

“We're not walking away from our dealership franchises,” Karney says. “We'll maintain our contractual relationship with dealers. What changes is that basically our dealers will be getting products from a different supplier.”

Dealer feedback at the meetings was mostly positive but some dealers were miffed because, until the face-to-face session, “they felt we weren't telling them in what direction we were moving,” Karney says.

A lot of questions about the future remain, says Mike McIntyre, truck manager at O'Rielly Truck Center in Tucson, AZ, who attended a Los Angeles meeting. “We probably won't know the answers for a while. It may be chaotic for the first few years.”

Yet, McIntyre is optimistic about the new arrangement. He particularly likes Navistar's plan to designate representatives to call on and work with GM truck dealerships.

“I don't see a downside to the deal because GM hasn't been doing much,” he says. “I haven't had a medium-duty truck field representative from GM since the previous one retired in 1994.

“Our commercial truck rep is a nice guy, but he doesn't know about medium duty. His previous experience was as an Oldsmobile field rep in Dubai,” McIntyre says.

There are about 550 GM medium-truck dealerships in the U.S., 80% of which also sell light-duty pickups. Navistar maintains about 900 International-brand dealership points, 515 considered primary outlets.

The two dealership networks will be kept separate and distinct, Tarrant says. “They will compete with each other. It's healthy to have the brands competing.”

Class 4 through 7 medium-duty trucks weigh at least 16,500 lbs. (7,484 kg). GM dealers tend to sell trucks more for commercial use, while International-brand retailers sell heavier trucks primarily for industrial use.

Powertrains represent one of the biggest “loyalty” factors in GM's medium-duty business, says GM spokesman Rob Minton.

Navistar's long-term strategy is to build GM and International trucks on common platforms. Navistar also expects to sell more medium-duty GM trucks than are sold now. The truck maker also anticipates economies of scale will reduce production costs.

“Both sides see this as a terrific joint enterprise,” Tarrant says. “It's a virtually unprecedented agreement. The way to think of it is that a little bit of GM has been grafted on us.”

About 162,000 Class 4-7 trucks were sold last year, with GM's typical market share about 16.5%. Navistar's share is about 35% in Class 6-7 trucks. It doesn't compete in Class 4-5.

GM has lost market share of late in Class 6-7 trucks. It long ago left the Class 8 heavy-duty business.