Volkswagen takes $256 million Navistar stake in trucks push

[FRANKFURT] Volkswagen has agreed to supply engines to US truck maker Navistar in exchange for a 16.6 per cent stake, an alliance forged in part by the need to meet stringent emissions regulations in the United States.

With few potential partners to choose from, Navistar is tying is fortunes to Volkswagen, which through its acquisition of MAN and Sweden's Scania has amassed global truck engine expertise, despite the scandal surrounding the German company's cheating of emissions tests in diesel cars.

Wolfsburg-based Volkswagen will pay US$15.76 a share, a 12 per cent premium to Navistar's closing price on Sept 2, to buy new shares in the US company, the two groups said on Tuesday.

US regulators last month announced new environmental standards designed to cut greenhouse gas emissions from medium and heavy-duty trucks by up to 25 per cent by 2027, adding pressure on Lisle, Illinois-based Navistar to seek a technology partner.

As part of the deal flagged by Reuters on Monday, Volkswagen and Navistar will also launch a joint venture for procurement, which Navistar said would help it reach synergies of at least $500 million over the first five years.

By year five, it expects the alliance to generate annual synergies of at least $200 million for Navistar, which could rise further as the companies continue to introduce technologies from the collaboration.

REUTERS