Eight years after announcing plans to build automobiles in Chattanooga to boost its U.S. share, Volkswagen announced today it is buying a 16.6 percent share in Navistar Intternational Corp. to boost its presence in the U.S. commercial vehicle market.
Volkswagen’s trucks division will invest $256 million in Navistar, and gain two seats on the company’s board of directors, in its new partnership with U.S.-based rival Navistar.
Volkswagen will supply engines to Navistar to help the truck maker meet new emission standards..
“We are a company that values partnerships,” Navistar CEO Troy Clarke told CNBC today in an interview from the company’s headquarters in Illinois. “We’re participating in an industry where there will be tremendous change in the next 20 years. This gives us an opportunity to collaberate on technology and realize economies of scale that are necessary for a company of this size.”
Andreas Renschler, the head of Volkswagens’s truck and bus division, said the companies have been in negotiation over the deal for the past six months.
“For us, it allows us to enter the U.S. market with our powertrain components with Navistar,” he said.
Volkswagen’s commercial vehicles division is trying to build itself into a global truck manufacturer after buying Germany’s MAN and Sweden’s Scania.
For its part, Navistar is looking for a technology partner to build engines that can meet ever more stringent emissions rules. For Volkswagen, Navistar provides a large North American dealer network.
Navistar has a market value of around $1.15 billion and has been looking for an engine partner since 2010 when it failed to get approval from the U.S. Environmental Protection Agency for its heavy-duty diesel truck engine.
The deal follows Nissan’s purchase in May of a 34 percent stake in Mitsubishi Motors and the 2013 purchase of a 5 percent share of Aston Martin by Mercedes-Benz parent Daimler in exchange for delivering next generation engines.