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VW offers $2.9bn for control of US truckmaker Navistar

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Via Financial Times

Volkswagen’s truckmaking subsidiary Traton has tabled a $2.9bn offer to buy the rest of American manufacturer Navistar, in an attempt to make inroads into the lucrative US heavy-duty vehicle market.

If successful, the deal would turn German-Swedish company into one of the largest heavy-duty truck players, to rival Daimler and Volvo, at a time when rising investment costs are squeezing margins. 

Volkswagen already owns almost 17 per cent of the Illinois-based brand, which is known for its school buses as well as its broad range of commercial trucks. 

While Traton is focused on Europe and South America, less than 2 per cent of its sales are in the lucrative North American market, a region where Navistar holds around 15 per cent market share.

The two businesses first joined forces in 2016. Traton also has a 25 per cent share in the Chinese truck firm Sinotruk and a strategic partnership with the Toyota subsidiary Hino. 

Volkswagen’s offer of $35 per share, represents a 45 per cent premium on Navistar’s closing price on Wednesday. The US manufacturer’s share price rose by more than 50 per cent in after-hours trading following the announcement. 

Traton, which was spun off by Volkswagen last year, comprises brands including Scania, Man and VW, and relies on Europe for almost 60 per cent of its sales. The company also has a strong presence in Brazil, but lacks exposure to North America.

Following several years of strong growth, supercharged by the boom in online shopping, the truck industry is facing a squeeze, with analysts expecting sales to plateau in several key markets.

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In December, Navistar announced it would cut 1,300 jobs — roughly 10 per cent of its workforce around the world — following a sharp decline in orders, particularly of heavy-duty trucks. 

The company told investors that “2020 won’t be a banner year”, after it slashed its daily production by around 25 per cent. 

On Thursday, Andreas Renschler, Traton chief executive said: “Over the past three years, we have benefited from a highly collaborative and productive strategic alliance with Navistar. As the market continues to evolve, we believe there are compelling strategic and financial benefits to a full combination of Traton and Navistar.”

Navistar responded by saying the offer was unsolicited, and that it will “carefully review and evaluate the proposal”.

Traton expects the deal to be completed by the end of 2020.

Fuel economy standards and the need to improve the driving experience of the vehicles is putting investment pressure on the sector at a time when sales are expected to ease following several years of growth.

Italy’s CNH is separating its truck division from its tractor unit next year in a bid to drive consolidation in the sector.

The industry has been slow to embrace electric engines, largely because of the costs and complications of moving such large vehicles laden with heavy batteries.

Navistar has dabbled with electric vehicles, producing battery-run school buses and medium-duty trucks. The brand has a fully electric medium truck set to go on sale this year, and already had plans for future vehicles to use Traton’s technology.

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