Volkswagen Truck Buys a US Foothold with Stake in Navistar

Volkswagen Truck & Bus commits to buy a 16.6% stake in Navistar for $256 million and founds a purchasing joint venture that could save the embattled US partner 200 million per year

Wall Street Journal, Forbes
The International HX Series, a new line of Class 8 vocational trucks introduced early this year, is the first all-new vehicle introduced by International Truck since 2010.
The International HX Series, a new line of Class 8 vocational trucks introduced early this year, is the first all-new vehicle introduced by International Truck since 2010.

On Tuesday morning, Volkswagen Truck & Bus said it would buy a 16.6% stake in Navistar at a cost of $15.76 a share, a $256 million injection Navistar can use to manage its $5 billion debt load.

Executives at Wolfsburg, Germany-based VW, whose heavy truck business includes European brands MAN and Scania, are establishing a commercial foothold in the U.S. despite having lost nearly $20 billion so far in fallout from failed emissions tests on many of VW’s most popular passenger cars.

Lisle, Ill.,-based Navistar, whose business is heavily concentrated in North America, continues to emerge from its own emissions problems. The company agreed earlier this year to pay the Securities and Exchange Commission $7.5 million to settle charges it misled investors about its ability to comply with tougher U.S. standards on diesel engine exhaust beginning in 2010.

Navistar neither admitted nor denied the charges, but the company’s emissions strategy plunged it into a tailspin that the Wall Street Journal says “has cost it hundreds of millions of dollars, halved its share of the U.S. heavy-duty truck market and wiped out about 80% of its market value over the past five years.”

The German automotive giant’s purchase comes with a joint procurement agreement that could reshape Navistar’s supply chain. Navistar expects the procurement JV will generate half a billion dollars of synergies over the next five years, and $200 million or more in annual cost savings by 2021.

The procurement JV will put Navistar into Volkswagen’s parts buying network. It will also give Navistar and Volkswagen increased buying heft as they invest in new powertrain technologies, and in-vehicle technologies such as advanced driver assistance systems, connected vehicle solutions, autonomous driving, electric vehicles, cabs and chassis.

Navistar stock, which hit a low of $6 a share in early 2016, has gained over 160% year-to-date as investors grow confident a bankruptcy is not imminent.

More on VW’s purchase of Navistar stake

-        From the Wall Street Journal

-        From Forbes

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