For nearly as long as this website has been around Navistar, maker of International Trucks and IC buses, has been a prime candidate for merger, partnership, or direct takeover by a European truck builder. I speculated as much in 2011 when the first signs of the EGR disaster began to bloom like a mushroom cloud in the sky. I don’t consider myself an expert on the the high finance dealing of the modern truck industry but it was simple enough to deduce which of the remaining U.S. independents would fall first. PACCAR being in much better health both financially and product wise plus its involvement with the European DAF brand of trucks made them an unlikely candidate. International on the other hand with its declining market share, increased debt load and limited global footprint made the most attractive choice to a foreign power like Volkswagen with its zero commercial vehicle footprint in North America. With dreams of competing globally with Daimler, owner of Freightliner and Western Star trucks, VW either had to start from scratch or buy their way into the party.

So we know how we got here but what is next? Volkswagen announced yesterday they would purchase a 16.6% stake in Navistar worth 256 million dollars with an understanding they will hold the shares for at least three years. This purchase price also allows for the appointment of two board members at the discretion of VW. While the stock purchase paves the way for an eventual merger the immediate consequences provide International with a much needed shot of capital, increased technological capabilities, and volume purchasing power of material and parts. Over the next five years this partnership is expected to save International over 500 million dollars. With International embarking on Project Horizon, an 18 month plan to introduce new trucks across their entire product line, these savings are immensely important.

The most immediate results of this cooperation will be seen in the form of powertrain components such as engines, axles and transmissions. It should be noted that the International N13 engine already uses technology sourced from MAN, a current subsidiary of the Volkswagen Truck group.

In an optimal world I would have liked to see International claw their way back into prosperity, a path they were solidly on before this recent news but ultimately I would rather see the name continue on then fall to the vultures of bankruptcy or reorganization. Much, much more to come on this front.

Sources: Navistar’s Clarke Touts Deal with Volkswagen; Navistar, Volkswagen Forge Global Parntership

Possible new corporate logo?