F Ford Motor Company

General Motors Co., looking to boost supply of pickup trucks to keep up with demand and halt declines in market share, is hiring Navistar International Corp. to take over certain production duties on commercial vans.

The deal, announced Thursday, is a boost for Illinois-based Navistar as it continues to look for ways to make up for the loss of the truck-making venture with Ford Motor Co. in Mexico, which ended last year. Under the GM deal, Navistar will produce certain models of Chevrolet Express and GMC Savana vans in a Springfield, Ohio, plant starting in the first half of 2017.

GM is tapping Navistar for production help as it scrambles for ways to boost supply of pickups during a time when low gasoline prices continue to boost demand for light trucks. The Express and Savana share production space in a Wentzville, Mo., factory where GM builds small pickup trucks.

GM had initially approached AM General LLC, the company that makes military vehicles and other products in Indiana, for help with the vans. That deal broke down due to disagreements over terms, according to multiple people familiar with the deal.

Although work vans remain a hot segment among commercial buyers, the No.1 U.S. auto maker and its dealers have consistently complained about a lack of adequate supply of pickups, a problem that disproportionately affects GM's market share and profits. It is unclear how the Navistar deal will affect pickup output, but it provides more flexibility to keep with demand, a GM executive said.

GM accelerated production of the small Chevrolet Colorado and GMC Canyon built in Wentzville earlier this year, but the company said demand for the midsize pickups still exceeds supply. It is also making moves to boost supply of full-size trucks, including the Chevrolet Silverado, and full-size SUVs, such as the Cadillac Escalade.

Specific terms of the multiyear contract weren't disclosed, but Illinois-based Navistar said it would add at least 300 jobs and restart a second assembly line at the plant that has been idle for several years. In a separate deal announced last year, Navistar will hire an additional 300 workers in Springfield to build larger GM medium-duty commercial trucks beginning in 2018.

Navistar already builds its medium-duty trucks in the Springfield plant.

The assembly contracts with GM bring Navistar some much-needed production volume to offset slumping demand for its larger commercial trucks. Navistar has spent four years trying to recover lost sales stemming from a disastrous strategy for complying with federal regulations on engine exhaust that undermined the reliability of Navistar's trucks.

Navistar on Tuesday reported its first quarterly profit in four years, but cut its sales and profit outlook for the year because of a weak truck market.

The cutaway vans that Navistar will assemble typically feature a cab, an engine and chassis that can be modified for specific uses, such as a shuttle bus, an ambulance or a delivery truck. Navistar said GM will supply the engines for the vans. The cabs will continue to be built at the Wentzville plant and shipped to Springfield where they will be painted and assembled into vans.

Write to Gautham Nagesh at gautham.nagesh@wsj.com and Bob Tita at robert.tita@wsj.com

(END) Dow Jones Newswires

June 09, 2016 14:55 ET (18:55 GMT)

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