Volkswagen Truck & Bus buying stake in Navistar for $256M

The deal “marks an important milestone for our commercial-vehicle business to gain a foothold in the North American market and develop a global industry champion”, said Volkswagen Chairman Hans Dieter Poetsch.

For Volkswagen, which has the MAN and Scania as part of its subsidiary stable, the deal will also provide access into the previously untried North American market. If you’re a company that buys trucks you don’t want to find that technology is stranded at some point in the future.

Navistar has also had its own emissions issues. 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 USA standards on diesel engine exhaust beginning in 2010.

“If your concern was that Navistar was not a company that can do that, that concern should go away”, he said.

Renschler reiterated in a conference call with analysts Tuesday that VW is keeping all options open as part of his expansion strategy, including increasing its stake in Navistar and a possible share sale of VW’s trucks division.

Volkswagen AG’s new truck development alliance with Navistar International Corp. fuels the German company’s ambition to chase rival Daimler AG into the about $30 billion a year North American heavy-duty truck market.

“There is a well-established trend in the industry, globally, along vertical integration”, Clarke said. “We will continue to offer Cummins products for a period of time”.

“We can deliver a captive powertrain for Navistar”, Renschler added.

What the two companies have in common are failures in developing technology to clean up diesel engine emissions.

The deal to share technology and procurement is still subject to regulatory approvals. That includes driver assistance systems, connected vehicle solutions, platooning and autonomous technologies, electric vehicles, and cab and chassis components. All trucks will kind of know where they’re at. “I fully anticipate we’ll increase consideration of our products, which will drive market share…it gives us the opportunity to get on the balls of our feet again”.

The alliance, first reported by Reuters on Monday, will see the creation of a joint venture for procurement, which Navistar said would help it reach synergies of at least $500 million over the first five years.

Volkswagen will pay around $16 per Navistar share or about 200 million euros ($223 million) in total, the source said.

Gaining traction in the US heavy-truck market, dominated by Daimler AG, Volvo AB and Paccar Inc., is key to VW’s plan to forge a global commercial-vehicle operation with higher profit margins than rivals.

In the meantime, Navistar has other priorities.

Navistar’s Clarke said that the company will be renewing its entire portfolio between now and 2018, starting with the launch of its First Horizon project vehicle this month.