The VW executive who will manage this partnership, Andreas Renschler, ran rival Daimler Trucks for nine years before he was named CEO of Volkswagen Truck & Bus in 2015.
Renschler is familiar with the U.S. market; in the 1990s, he oversaw the launch of Mercedes’ assembly plant in Vance, Ala.
Without the VW alliance, the Chicago-based truckmaker’s long-term survival would have been doubtful.
Navistar still is recovering from a disastrous decision a decade ago to develop a diesel emissions system that did not use urea to eliminate nitrogen oxide, a key element of smog.
Navistar’s system relied on exhaust gas recirculation to channel its exhaust gases back into the engine cylinders to burn off NOx. It never received EPA approval, and company CEO Dan Ustian finally quit in 2012.
The company discontinued many “vocational” truck models — such as cement mixers and dump trucks — and it scrambled to equip other models with Cummins engines. Navistar also cut jobs, abandoned several overseas ventures, closed assembly plants and raised money by selling stock.
The company board also named a new CEO: Troy Clarke, a General Motors veteran who left the automaker in 2009.
But Navistar lost customers. According to IHS, Navistar’s share of North American Class 8 truck sales plunged to 13 percent last year, down from 25 percent in 2010.
This year, Navistar began to stabilize its market share as it introduced new models. In February, it introduced its International HX Series of vocational trucks — the division’s first all-new models since 2010 — and this month, Navistar will unveil the first of its Project Horizon truck models.
In an earnings call Thursday, Sept. 8, Clarke said Navistar has begun to regain market share. “We do see some encouraging signs for the quarter,” he told analysts. “Our share of new orders has been up for three consecutive quarters. ... It validates our investment in new products.”
To be sure, the entire industry is suffering through a business downturn. As the U.S. economy cools off, North American sales of Class 8 trucks are expected to total 257,000 units this year, down from 302,000 in 2015.
Navistar couldn’t dodge that bullet. Even with a stable market share, the company’s sales for the three-month period ending July 31 declined 18 percent to $2.1 billion.
On the upside, Navistar has slashed $300 million in costs so far this year, ahead of its annual target. And it will have a cash reserve of $800 million by year’s end, enough to continue operations.
Despite the industry downturn, analysts seem satisfied that Navistar has stabilized. In a report last week, Baird Equity analyst David Leiker wrote that the VW deal “likely provides support to [Navistar’s] stock and removes the concerns over bankruptcy.”
Likewise, S&P Global Inc. said Navistar’s CCC+ credit rating — which questioned its ability to repay debts under adverse conditions — would be raised one notch to a BB- rating.