GM, Navistar Team on Medium-Duty Trucks

General Motors Co. and Navistar International Corp. have reached a long-term agreement to develop medium-duty commercial trucks, paving the way for the auto maker's return to a segment it abandoned six years ago.

Under the deal, GM will supply components and engines to Navistar which will build the trucks at its Springfield, Ohio, plant starting in 2018. Navistar will add 300 jobs and invest more than $12 million in the factory. Exact terms of the deal weren't disclosed, but the trucks will feature GM-built engines.

Both GM and Navistar will sell the trucks. GM said the trucks will once again carry the Chevrolet brand but won't be sold under the GMC brand. A spokesman declined to say if Chevrolet will reactivate the Kodiak nameplate for the trucks.

The trucks are generally used in the service industry as tow trucks, dump trucks, delivery trucks and for construction work.

The deal will bring Navistar some much-needed production volume for its medium-duty truck business after the company ended a truck-making venture in Mexico with Ford Motor Co. earlier this year.

For GM, the announcement underscores the reversal of fortune the auto maker is experiencing as both consumers and businesses, particularly in the U.S., continue buying. Many business and fleet operators had delayed purchases when the U.S. economy stalled in 2008 and 2009.

"Our dealers have told us they need these trucks back in their commercial truck lineup," a GM spokesman said.

The GM-Navistar venture will also help Navistar blunt Ford's efforts to expand its truck business with its own vehicle lineup.

Navistar had long reigned over the medium-duty market, but lost market share in recent years after the disastrous strategy for treating diesel engine exhaust undermined truck reliability, causing customers to fleet to other truck brands. The Illinois company has been trying to rebuild its share of the medium-duty market for the past year.

The long lead time before the GM trucks reach the market should allow GM and Navistar to avoid an expected drop in demand for commercial trucks in the next couple of years.

Earlier this year, GM said it would team up with Japan's Isuzu Motors Ltd. to procure work trucks to be sold in the U.S. under the Chevrolet brand. The trucks are somewhat smaller than the medium-duty trucks Navistar will build.

The demise of the Kodiak and the GMC Topkick came after GM filed for bankruptcy in 2009. The auto maker had tried but failed to sell the medium-truck unit. Navistar had been in the running to buy the business but a deal never materialized.

At that time, then GM CEO Fritz Henderson told reporters the medium-duty truck business hadn't been successful for years. The company sold about 20,000 of the vehicles in 2008.

Tess Stynes contributed to this article

Write to Jeff Bennett at [e-mail] and Robert Tita at [e-mail]

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(END) Dow Jones Newswires

September 30, 2015 12:45 ET (16:45 GMT)

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