Volkswagen Truck & Bus and Navistar announced they have closed a strategic partnership and procurement joint venture that was first announced last September.
The $256-million deal officially introduces VW Truck & Bus, a subsidiary of Volkswagen AG, and its brands into the North American market. In addition, VW Truck & Bus now has a 16.6-percent stake in Navistar.
"The authorities have given our strategic alliance with Navistar the green light," said Andreas Renschler, CEO of VW Truck & Bus. "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."
Navistar said it will use the money it earned from the deal for “general corporate purposes.”
Troy Clark, president and CEO of Navistar, said the deal marks a “significant milestone” in the Illinois-based manufacturer’s history, and that he expects “multiple benefits” for both companies going forward.
"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," he said in a statement on Wednesday.
According to both companies, the venture, titled Global Truck & Bus Procurement LLC, will improve manufacturing quality, while also reducing costs from increased global scope and scale. It is now being run out of Navistar’s headquarters in Lisle, Illinois, and comprises representatives from both companies who oversee the marriage of the International, IC Bus, Scania, MAN and Volkswagen Caminhões e Ônibus.
The companies' ongoing technology and supply collaboration operates out of Stockholm, Sweden. VW Truck and Bus and Navistar said this collaboration will facilitate commercial vehicle development, including advanced powertrain technology solutions. The companies added that this is eventually expected to optimize research and development spend and expand the technology options offer to customers.
Navistar added that it continues to expect “significant synergies” from both the strategic technology collaboration and the procurement joint venture. As previously announced, Navistar said it 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, Navistar said the alliance should be generating annual synergies of at least $200 million for Navistar. The company explained that this annual run rate is expected to grow materially thereafter as it and VW Truck and Bus continue to introduce new technologies.
The alliance agreement and VW Truck & Bus's ownership stake includes the new appointments of Renschler and Matthias Gründler, chief financial officer for the VW subsidiary, to 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," Clarke said. "Their expertise in commercial vehicle production will be invaluable as we strive to become the North American champion in our industry."