Trucker 841 Vw Benefits

Navistar-Volkswagen deal: What can truck buyers expect?

Sept. 6, 2016
Strategy apparent, still too soon to announce new products plans

Two years after taking over Swedish truck maker Scania and combining it with MAN, Volkswagen has agreed to take a 16.6% piece of Navistar International Corp. in a move that will give the German company a foothold in the North American market while boosting the capabilities (and bank account) of Navistar. But what will it mean to truck buyers on this side of the Atlantic? Stay tuned, explained Navistar President and CEO Troy Clarke on a conference call with Wall Street analysts and news media.

And he wasn’t being evasive: It’s simply too early to know the products that might emerge from the deal, one that has only been recently negotiated by small teams of top officials from each company, Clarke noted, and he characterized the initial, strategic aspects of the alliance as the “30,000-foot view.”

Clarke did point out that the current N-series 13-liter engine is derived from a previous licensing agreement with MAN, and so the companies already share “a very close engineering working relationship” on the platform.

“We have plenty of opportunities over the next months to see what we can do to align our product portfolios,” Clarke said, and he agreed that “it would seem logical” that Navistar would produce Volkswagen engines in North America.

He also hinted that a powertrain product could be developed by 2019, an “illustrative” timeframe that’s “not tomorrow, but not well into next decade.”

Likewise, Andreas Renschler, CEO of Volkswagen Truck & Bus, explained the timing is critical, as the truck unit is developing a common, global powertrain platform for MAN and Scania.

“It’s the right timing to do so, because now Navistar can be there from Day 1,” he said.

Renschler also noted that, in his previous role with Daimler, he had been involved in developing the global truck manufacturing strategy.

“It’s always good, if you have the experience, that you don’t make the same mistakes,” he said. “Don’t ask me what kind of mistakes, but with that experience you can expect something from [the new alliance].

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As to suppliers that might be displaced with an integrated powertrain platform, Clarke emphasized that “Cummins is a great partner for us. The Cummins engine is truly an outstanding product that’s given us a lot of traction in the market. We work very closely with them, and we anticipate that we’ll continue to offer Cummins products for a period of time. We’re not speculating on that today.”

So far this year, 73% of Navistar Class 8 trucks built have used a Cummins engine, according to an investment note from Stifel, in contrast to the shrinking share of third party engines used by PACCAR (Kenworth and Peterbilt truck brands) and Daimler (Freightliner, Western Star).

“In fact, we wonder whether supplying engines to the North American market might be the largest motive of the deal from Volkswagen’s perspective, given Volkswagen’s capabilities in that area through its MAN and Scania nameplates,” the report suggests. However, “we believe the OEMs will continue to offer all available engines to all customers, many of which have a preference for the Cummins 15-liter engine.”

More broadly, the agreement “relieves anxiety” for some International Truck customers, Clarke explained.

“If you buy trucks, you don’t want to buy something that leaves you stranded when the technology is discontinued at some time in the future. It disrupts the residual value that you often rely upon for payment for the next truck,” Clarke said “This will get at that in a big way. We’re already improving our market share, just not as fast as we had hoped. This will accelerate consideration of our products. This is just the first step, then we’ll concentrate on the next step, and the next step. With this kind of alliance, it gives us the opportunity to get some good stuff done it the market.”

As for the Project Horizon rollout—a series of new product announcements slated to begin next month and continue through 2017—Clarke suggested that there’s nothing in alliance with Volkswagen to distract customers or “disrupt the very positive sentiments that will be created” with the pending launch.

While the deal won’t result in any new products in the near term, customers can expect to see immediate benefits from the global sourcing alliance with Volkswagen, Clarke added.

“There’s a whole bunch of great reasons to consider the International product today,” he said. “This [alliance] is just another great reason.”

About the Author

Kevin Jones | Editor

Kevin has served as editor-in-chief of Trailer/Body Builders magazine since 2017—just the third editor in the magazine’s 60 years. He is also editorial director for Endeavor Business Media’s Commercial Vehicle group, which includes FleetOwner, Bulk Transporter, Refrigerated Transporter, American Trucker, and Fleet Maintenance magazines and websites.

Working from Little Rock, Kevin has covered trucking and manufacturing for 15 years. His writing and commentary about the trucking industry and, previously, business and government, has been recognized with numerous state, regional, and national journalism awards.

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