Navistar, Volkswagen close alliance deal

“The authorities have given our strategic alliance with Navistar the green light. Our newly-founded purchasing cooperation will begin work immediately. This puts both partners in a stronger position for the future. The strategic alliance provides Volkswagen Truck & Bus with access to the all-important North American market. This is a major step toward becoming a global champion,” said Andreas Renschler, CEO of Volkswagen Truck & Bus.

With the closing of the alliance, Volkswagen Truck & Bus acquired approximately 16.2 million newly issued shares in Navistar, representing 16.6% of post-transaction undiluted common stock (or 19.9% of pre-transaction outstanding common stock), effective Feb. 28, 2017. As a result, Navistar receives $256 million to be used for general corporate purposes.

As part of the alliance agreement and in line with Volkswagen Truck & Bus’s ownership stake, Renschler and Matthias Gründler, chief financial officer of Volkswagen Truck & Bus, are joining Navistar’s board of directors.

“We are excited to welcome Andreas Renschler and Matthias Gründler to the Navistar Board, and are confident that we will benefit from their deep industry knowledge and fresh perspectives,” said Clarke. “Their expertise in commercial vehicle production will be invaluable as we strive to become the North American champion in our industry.”

Global Truck & Bus Procurement LLC, the procurement joint venture created by Navistar and Volkswagen Truck & Bus, will start work effective immediately. As part of the alliance, it will create new opportunities for quality improvement and cost reduction, and will enable both companies to benefit from increased global scope and scale. The joint venture is operating out of Navistar’s headquarters in Lisle, Illinois, and comprises representatives from both companies who will be combining the demand of five brands, including Volkswagen Truck & Bus’s Scania, MAN and Volkswagen Caminhões e Ônibus, in addition to Navistar’s own International and IC Bus brands.

Technology sharing

The companies’ ongoing technology and supply collaboration, which operates out of Stockholm, Sweden, is intended to facilitate collaboration on several aspects of commercial vehicle development, including advanced powertrain technology solutions. Ultimately, it is expected to optimize research and development spend and expand the technology options both companies will be able to offer customers.

Navistar continues to expect significant synergies from both the strategic technology collaboration and the procurement joint venture. As previously announced, Navistar expects the alliance to be accretive beginning in the first year, and for cumulative synergies for Navistar to ramp up to at least $500 million over the first five years. By year five, it expects the alliance will generate annual synergies of at least $200 million for Navistar. This annual run rate is expected to grow materially thereafter as the companies continue to introduce technologies from the collaboration.

Volkswagen Truck & Bus houses the MAN, Scania, Volkswagen Caminhões e Ônibus, and RIO brands. The company intends to boost its profitability, customer innovation, and global presence over the next decade to become a leading commercial vehicle group worldwide.