VW-Navistar: Full steam ahead

Expect some changes at Navistar International Corporation now that two top Volkswagen AG executives are on board the train following the authorities‘ approval of Volkswagen Truck & Bus GmbH's stake in U.S. partner Navistar International Corporation.

Volkswagen Truck & Bus has paid US$ 256 million for a 16.6 per cent share of the company shares in the joint venture Global Truck & Bus Procurement LLC which has been established.

VW chief executive officer Andreas Renschler and chief financial officer Matthias Gründler have become members of Navistar's board of directors. These two men are not small fry; they understand VW’s operations and soon will have a handle of those of beleaguered Navistar.

So one can expect changes (following the handshakes and general niceties of the first board meeting) now these two men have joined the existing board of directors.

Andreas Renschler puts it kindly: "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."

But in effect, Volkswagen AG has been given official approval to set up a strategic alliance between Volkswagen Truck & Bus GmbH — which houses the MAN, Scania, Volkswagen Caminhões e Ônibus, and RIO brands — and U.S. commercial vehicle manufacturer Navistar International Corporation.

Volkswagen Truck & Bus has therefore acquired a stake of 16.6 per cent in of the company shares in Navistar Purchasing joint venture Global Truck & Bus Procurement LLC. But for its stake, VW will expect to make some changes and bring some muscle of its own to the party.

Navistar paid US$ 15.76 per share giving a purchase price is US$ 256 million and takes the form of a capital increase.

The cooperation primarily involves “working together on technical components” and in procurement. Following an internal Navistar resolution, Volkswagen Truck & Bus’s Renschler and Gründler yesterday joined the Navistar board.

"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 towards becoming a global champion," said Renschler, boss of Volkswagen Truck & Bus.

Troy Clarke, president and chief executive officer added his two-pennyworth saying: "This alliance with Volkswagen Truck & Bus marks a significant milestone in our company's history, and will create multiple benefits for both companies in both the near- and long-term. 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."

Note Clarke’s use of the words global scale. That is what Navistar must be wanting – a global footprint. But Clarke could not do that alone without new technology and purchasing inputs. He also talked of the new partnership creating multiple benefits without spelling these out.

And by using the word components the joint press statement clouds the issues, because the only siginifcant component of interest must be powertrains – this is the soft underbelly of Navistar International Corporation. It also has to make its trucks and buses more competitive.

Thus technical cooperation therefore between the two groups can now begin. Volkswagen Truck & Bus says it is to become one of Navistar's key technology partners. Navistar will be able to benefit from Volkswagen Truck & Bus's advanced powertrain technologies in the future. This in turn will result in significantly higher volumes for Volkswagen Truck & Bus.

Although the opportunities for cooperation are said to lie in the fields of autonomous driving, alternative fuel technologies, and connectivity which will be explored, there is no doubt that powertrain will be the big focus of attention.

This whole field of cooperation underscores Volkswagen Truck & Bus's aspiration to offer its customers all over the world intelligent and eco-friendly solutions.

                             Purchasing joint venture and Alliance Board

The aim of closer cooperation in the supply chain is for both alliance partners to benefit from cost advantages and economies of scale. To this end, Volkswagen Truck & Bus and Navistar have founded the joint venture Global Truck & Bus Procurement LLC, headquartered in Lisle (Illinois). It will begin work immediately.

An alliance board made up of representatives from both companies will drive the strategic alliance forward at operational level. On behalf of Volkswagen Truck & Bus, Dr. Frederik Zohm will be in charge of its operational work.

Volkswagen Truck & Bus GmbH is a wholly-owned subsidiary of Volkswagen AG and is a global leader in commercial vehicles with its brands MAN, Scania, Volkswagen Caminhões e Ônibus and RIO.

In 2016, the brands of Volkswagen Truck & Bus sold a total of 184,000 vehicles. Its product range includes light commercial vehicles, trucks and buses that are manufactured at 25 sites in 17 countries. As of 31 December, 2016, the company employed 77,000 people at all commercial vehicle brands worldwide. The Group says it is committed to driving transportation to the next level — in terms of products, services, and as a partner for its customers.

Navistar International Corporation is a holding company whose subsidiaries and affiliates produce International branded trucks, proprietary diesel engines, and IC Bus brand school and commercial buses. An affiliate also provides truck and diesel engine service parts. Another affiliate offers financing services.