Navistar, Volkswagen Seal $256 Million Alliance Deal

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Transport Topics  /  March 1, 2017

Navistar International Corp. and Volkswagen’s Truck & Bus division completed their alliance announced in September, with the German automotive company acquiring 16.2 million common shares, or 16.6% of equity, and the Lisle, Illinois, truck maker getting $256 million. The deal was completed Feb. 28 and announced March 1 after the government regulators approved the transaction.

“We never doubted it would close. The final approval was not in the U.S. or Europe but in one of the other places where we both do business,” Navistar Chairman and CEO Troy Clarke said in an interview shortly after the transaction was completed.

The deal gives Navistar three separate major owners that collectively own about a half of the original equipment manufacturer: Carl Icahn, Mark Rachesky and VW.

Icahn and Rachesky have had two seats each on Navistar’s board of directors, and now VW also has two.

Joining the board are Truck & Bus CEO Andreas Renschler and Chief Financial Officer Matthias Grundler.

Clarke said they joined the board Feb. 28, raising membership to 12 people.

Renschler is the former head of the Daimler AG global truck division, the world’s largest heavy truck maker. VW’s two major heavy truck brands in Europe are MAN and Scania.

Clarke said the VW money will be used for general purposes and that it gives the parent of International trucks and engines some breathing room. Clarke has been leading Navistar’s turnaround effort since 2013, during which time the company has carefully monitored cash reserves.

“We do manage cash specifically and deliberately,” Clarke said. “We don’t anticipate using the money immediately, but it is good to plus-up our balances.”

Although very useful, the money is probably not the most important part of the deal. Clarke said the two companies remain separate, as VW owns only about one-sixth, but the two will collaborate extensively.
Most obvious is the new procurement joint venture, with the two OEMs pooling their purchasing power. Clarke said this will have three components: basic commodities, including oil, antifreeze and paints; components, such as fuel pumps; and finally, the development of future products.

“This is a longer thing, where technology and procurement overlap,” Clarke said.

Executives and managers from the two companies had been talking about how to proceed on a somewhat detached, conceptual basis. Now, Clarke said, they are also plunging into specifics.

Not only are engineers and other professionals working with each other on trucks and engines in Lisle and VW’s headquarters city of Braunschweig, Germany, but also on technology.

Clarke said Navistar and VW share an interest in connected vehicles, or the “digitization” of commercial vehicles, as the Germans call it.

“This is a huge area,” Clarke said of telematics for maintenance and customer service, and technology for active safety systems, autonomous driver assistance and platooning.

“There’s as much excitement here [in technology] as in the greasy bits” of oil filters and wheel ends. Technological advancement was sometimes difficult as a stand-alone company, Clarke said. That could mean prioritizing between developing a new cab and working on emissions regulations.

“Now we have enough for both,” he said. “It’s great having a partner who looks at things the same way we do.”

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Navistar, Volkswagen close alliance deal

Fleet Owner  /   March 1, 2017

Navistar International Corporation announced the closing of its wide-ranging strategic alliance with Volkswagen Truck & Bus, which includes an equity investment in Navistar by Volkswagen Truck & Bus and framework agreements for a procurement joint venture and strategic technology and supply collaboration.

“This alliance with Volkswagen Truck & Bus marks a significant milestone in our company’s history, and we expect it will create multiple benefits for both companies in both the near and long term,” said Troy Clarke, chairman, president and CEO, Navistar. “Now that the transaction has closed, we will move quickly to collaborate with an industry-leading, strategic partner to increase our global scale, strengthen our competitiveness, and provide our customers with expanded access to cutting-edge products, technology and services.”

“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.

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.

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Navistar, Volkwagen Close Strategic Alliance Deal

Heavy Duty Trucking  /  March 1, 2017

Navistar International Corp. announced the closing of its "wide-ranging strategic alliance" with Volkswagen Truck & Bus, which includes an equity investment in Navistar, a procurement joint venture, and technology and supply collaboration.

"This alliance with Volkswagen Truck & Bus marks a significant milestone in our company's history, and we expect it will create multiple benefits for both companies in both the near and long term," said Troy Clarke, Navistar chairman, president and CEO. "Now that the transaction has closed, we will move quickly to collaborate with an industry-leading, strategic partner to increase our global scale, strengthen our competitiveness, and provide our customers with expanded access to cutting-edge products, technology and services."

In fact, evidence of the new collaboration was already evident this week with Navistar's announcement at the ATA Technology & Maintenance Council annual meeting of the new A26 engine, based on the crankcase of a D26 engine from MAN – a German truck and engine manufacturer wholly owned by Volkswagen.

"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. As a result, Navistar receives $256 million to be used for general corporate purposes.

Renschler and Matthias Gründler, Chief Financial Officer of Volkswagen Truck & Bus, are joining Navistar's board of directors.

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.

Global Truck & Bus Procurement LLC, the procurement joint venture created by Navistar and Volkswagen Truck & Bus, will start work effective immediately. Operating out of Navistar's headquarters in Lisle, Illinois, it's made up of 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.

Navistar continues to expect significant synergies from both the strategic technology collaboration and the procurement joint venture, expecting at least $500 million in "cumulative synergies" over the first five years.