VW bets on U.S. trucks, buys stake in Navistar
Bloomberg News
Volkswagen AG will buy a stake in Navistar International Corp. to gain a foothold in the U.S. heavy-truck market, taking a gamble on a struggling U.S. manufacturer as the German company still grapples with the fallout from the emissionscheating scandal.
VW will pay $256 million for a 16.6 percent holding and assume two board seats as part of a deal that includes technology sharing and joint purchasing, the two companies said Tuesday. The Wolfsburg-based automaker will pay $15.76 per share, 12 percent more than Navistar’s closing price on Friday, the most recent trading day in the U.S. The holding puts Volkswagen on a par with the largest shareholders, activist investors Carl Icahn and Mark Rachesky.
Gaining traction in the U.S. 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. The marriage isn’t without risk, given Navistar’s shrinking market share in the U.S., a country that also has confounded VW. Even before the diesel-cheating scandal, Volkswagen’s car sales were slipping behind competitors in the region.
Working with Navistar will provide access to technology and designs targeting customers in the U.S., where model lines are wholly different from offerings in the rest of the world.
Many U.S. truck drivers prefer vehicles with an elongated nose, while European operators buy trucks with a flat face due to length restrictions.
VW and Navistar expect to reap combined synergies of $500 million over the next five years, they said Tuesday. Navistar posted its first profit in 14 quarters in the three months through April, helped by spending cuts.
The Lisle, Illinois-based company is no stranger to dramatic consequences from emissions-related troubles. The truck maker had to kill most versions of its so-called premium vocational models in 2010 because they lacked diesel engines that complied with U.S. federal air-pollution rules. Navistar’s market share has tanked since its pollution-control technology failed to meet industry standards and brought the company to the brink of collapse.