General Motors Corp. said Thursday it is selling its defence unit - headquartered in London, Ont. - to General Dynamics Corp. for $1.1-billion (U.S.) in a deal that expands the military contractor's vehicle line and furthers the auto maker's efforts to bolster its balance sheet.
Under the terms of the agreement, GM will keep its military trucks business in Troy, Mich.
The boards of both companies have approved the deal, which is expected to close in the first quarter of next year.
With its head office in London, Ont., GM Defense is a group of companies which design and produce light armored vehicles and supporting turret systems for military use.
It has operations in Canada, the United States, Australia and Switzerland, the birth place of the light armored vehicle technology used today by GM Defense.
Workers at GM Defense's London plant are represented by the Canadian Auto Workers union, which has expressed some concern that job losses might result from the deal if production is moved to the United States.
But GM said General Dynamics will honour the union's new three-year contract, which includes language protecting the London plant from being shut down having or its production moved during the term of the agreement, which runs to September 2005.
A GM spokesman told Canadian Press the sale is not expected to affect the London workforce.
The units being acquired by General Dynamics reported about $965-million in revenue this year and employ about 2,400 workers.
"I am very excited about the growth opportunities for GM Defense as part of a leading global defense company like General Dynamics," Bill Pettipas, GM Defense executive director, said in a statement.
"The ability to leverage General Dynamics' market-leading technologies with our great vehicle platform can only take our business to greater strength."
Vehicles produced by GM Defense are currently used by the U.S. Marine Corp., the Canadian Army and other military forces around the world. The unit's biggest order - under the U.S. Army's Stryker Brigade Combat Team program - is currently being filled through a joint venture between GM Defense and General Dynamics land systems unit.
That $9-billion program includes more than 2,100 vehicles and is widely viewed as an important part of the U.S. Army's efforts to remake itself into a more mobile operation.
Auto maker GM, meanwhile, is attempting to strengthen its balance sheet in part through the sale of non-core businesses.
"This transaction secures the best possible long-term future for the GM Defense business and its employees, while contributing significantly to GM's cash and liquidity objectives," GM chairman Jack Smith said in a statement.
General Dynamics, based in Falls Church, Va., employs about 54,000 people around and expects to post revenue of about $14-billion. Thursday's deal expands the company's offerings of lighter, wheeled vehicles, the fastest-growing segment of the market.
Terry Weber