Navistar International Corporation said it had closed on its, previously announced, wide-ranging strategic alliance with Volkswagen Truck & Bus which includes an equity investment in Navistar by the German company and framework agreements for a procurement joint venture and strategic technology and supply collaboration.
The closing of the alliance follows receipt of all necessary regulatory approvals, finalisation of agreements relating to the procurement joint venture and the technology and supply collaboration, and satisfaction of the usual closing conditions.
"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 [us] 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 16.2m newly issued shares in Navistar, 16.6% of the stock. As a result, Navistar in return received $256m to be used for general corporate purposes.
As part of the alliance agreement and in line with VW Truck & Bus's ownership stake, Renschler and his CFO Matthias Gründler are joining Navistar's board.
"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."
Procurement joint venture
Global Truck & Bus Procurement LLC, the joint venture created by the two vehicle makers, will start work 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 from Navistar's headquarters in Lisle, Illinois, and comprises representatives from both companies who will be combining the demand of five brands – Scania, MAN, Volkswagen Caminhões e Ônibus, International and IC Bus.
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. Ultimately, it is expected to optimise research and development spend and expand technology options offered to customers.
Navistar continues to expect "significant synergies" from both collaboration and joint venture. As previously announced, it expects the alliance to be accretive in the first year, and for cumulative synergies for Navistar to rise to at least $500m over the first five years. By year five, it expects the alliance will generate annual synergies of at least $200m for Navistar. This annual run rate is expected to grow materially thereafter as the companies continue to introduce technologies from the collaboration.