Categories Earnings

Navistar shares rev up as Volkswagen eyes truck-maker buyout

German automaker Volkswagen has been passing through testing times over the past few years, and the crisis triggered by the protracted emission scandal reached its peak when CEO Matthias Mueller made an unceremonious exit last week.

Ever since regulators detected severe flaws in the emission control systems of some of its models, the multinational automotive giant was struggling to regain its foothold in the American market.

The first move in that direction after Mueller’s departure came this week when the company hinted at acquiring the truck division of Navistar (NAV). It has been Volkswagen’s strategy to augment the commercial vehicles division after it was separated from the passenger vehicles unit a few years ago.

No wonder the company chose to shift focus to the truck business at a time when its core business got embroiled in one of the worst scandals the automobile industry has witnessed.

Volkswagen is reportedly in talks with Navistar to acquire the American truck maker

For Volkswagen, which already owns a major stake in Navistar — next only to activist investor Carl Icahn — adding the truck maker to its fold will give a significant boost to the growth initiatives in America. The deal will also help the company expand market share for its commercial vehicle division globally, and compete with other major players in the sector, such as Daimler and Volvo.

Moreover, it is imperative for the German company to ramp up its prowess in the truck and bus segment internationally in order to attract more investors. In that context, Volkswagen is likely to launch an IPO for the combined entity, if the deal materializes. An IPO for the heavy-vehicle division has been under consideration since the company earlier announced a tie-up with Navistar to roll out a fully battery-powered truck next year.

Though Matthias Gruendler, CFO of Volkswagen’s heavy vehicle unit, made a veiled reference to the purchase price, saying it would be between ‘three billion and four billion,’ he did not specify whether it is in dollars or euros.

Shares of Navistar climbed steadily since the first reports of the potential takeover came out early this week, marking the biggest gain this year. The stock gained nearly 10% before closing the last trading session and continued to gain in early trading Tuesday.

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