The most important fact to emerge from the announcement that Volkswagen is buying a stake in US truck maker Navistar is that the US maker’s trucks are set to get Volkswagen powertrains by 2019, presumably sourced from its European heavy vehicle brands, MAN and Scania.
The fact was revealed by both companies in a post announcement press conference call.
The announcement that engines from VW’s heavy truck empire would be slotted into Navistar vehicles in the future has posed the equation of what will happen to Navistar’s current engine supplier, Cummins. There is no immediate word on what the newly formed strategic alliance will mean for the US engine builder and its ongoing relationship with Navistar.
“Cummins is a great partner for us and the Cummins engine in our product is an outstanding product,” said Troy Clarke, CEO of Navistar. “I anticipate we’ll continue to offer Cummins products for a period of time…we’re not speculating or making announcements in that regard today.”
Volkswagen announced it has taken a 16.6% stake in Navistar with Volkswagen Truck & Bus CEO, Andreas Renschler, saying the time was right to partner with Navistar, because of where Volkswagen is in the production cycle of its next generation powertrain. Partnering now allows the companies to work together on development of the powertrain and integrating it into International trucks in North America.
“For us, it was the right timing,” said Renschler. “Because we are at the moment designing new powertrain components for the whole world…Now Navistar joins us at the right time so we can develop them together and start to see real economies of scale.”
Clarke said the strategic alliance is built on four pillars: A US$256 million cash injection from Volkswagen will improve its liquidity position; the two companies will jointly pursue strategic technological and supply collaboration; the truck makers will conduct the strategic sourcing of parts globally; and a separate board will be formed to oversee the joint venture. Volkswagen will also add two members to the Navistar board of directors.
Current Navistar board members James Keyes and Michael Hammes have resigned from the board. Clarke said the partnership should bolster confidence among Navistar customers that the brand is on solid footing.
“This will relieve anxiety on the part of some of our customers,” he said. “I fully anticipate we’ll increase consideration of our products, which will drive market share…it gives us the opportunity to get on the balls of our feet again.”
While North American truck orders are currently soft, Clarke said Navistar has increased its order share for eight consecutive months. Bringing a vertically integrated powertrain to its products with the help of Volkswagen will benefit customers, Clarke said.
“There is a well established trend in the industry globally along vertical integration,” he said.
“We can deliver a captive powertrain for Navistar,” Renschler added.
In the meantime, Navistar continues to update its complete product line. Clarke said the first vehicle to be launched as part of its Project Horizon will be revealed later this month. Renschler predicted the partnership will make Volkswagen one of Navistar’s most important technology partners going forward. With the alliance announced, the two companies will begin working together on product development that will include not only the engine, but also axles, transmissions and aftertreatment systems, Renschler said.
The two truck makers now boast global truck and bus production of about 260,000 units per year.