In November, Volkswagen’s TRATON group and Navistar announced a merger agreement in which TRATON will acquire all outstanding shares of Navistar. Previously, TRATON held 16.7% of Navistar’s common shares. The deal is valued at $3.7 billion and is expected to be finalized in mid-2021.
Navistar has been in collaboration with TRATON’s brand MAN for a number of years, primarily with regard to engine development. PSR believes additional engine offerings will be one of the primary goals to improve profitability and long-term market share improvement within the class 8 truck segment.
Navistar’s decision to use EGR (exhaust gas recirculation) only rather than SCR (selective catalytic reduction) as their solution to the 2010 greenhouse emission standards adopted in the United States proved to be disastrous for the company.
Not only was Navistar unable to meet the stricter standards with their MaxForce engine platforms, they also experienced significantly higher warranty costs along with a number of lawsuits as a result of downtime incurred by the fleets. This decision resulted in a significant loss of class 8 market share over the years.
Prior to the U.S. 10 emission regulations, Navistar produced a complete lineup of heavy truck engines which included an 11, 13 and 15 liter engine. As a direct result of their failure to meet the 2010 emission regulations and the numerous engine problems in the field, Navistar ended production of their 11 liter engine and replaced their 15 liter engine with the Cummins ISX 15 liter engine.
In March of 2017, Navistar introduced their new 12.4 liter A26 engine which is based upon the MAN D26 engine platform. In the fall of 2017, Navistar ended production of their 9 and 10 liter engines that were installed in class 6 & 7 medium trucks primarily due to the high cost of emission certification for future regulations. These were replaced with the Cummins L series 9 liter engine platform.
In June 2019, Navistar Inc. announced it would invest $125 million in new and expanded engine manufacturing facilities in Huntsville, Ala., over the next three years as it prepares to produce next-generation big-bore powertrains developed with its global alliance partner, TRATON. Ground was broken on the plant expansion in February, and the expansion is expected to be complete in 2023.
In my opinion, Navistar will focus on developing an 11 liter engine based upon the MAN D20 engine platform for the class 8 segment and possibly a 9 liter engine based upon the MAN D15 engine platform to serve the class 7 and “baby 8” segments.
As for a replacement for the 15 liter engine, Navistar may choose to introduce a platform based upon the MAN D38 engine to ultimately replace the Cummins 15 liter X platform.
At some point, they may also replace the Cummins B6.7 liter engine with the MAN D08 platform for the medium truck segment. However, the Cummins engine offering is unlikely to be completely superseded anytime soon since Cummins engines are extremely popular with the fleets.
The acquisition of Navistar by TRATON will enable Navistar to be a stronger competitor in the MHCV market by providing the engine range to better compete with Daimler, PACCAR and Volvo in the North American market.
This merger will greatly help Navistar reduce costs and provide the company with the knowledge needed to develop future truck designs such as electric, hydrogen fuel cell and autonomous driven vehicles that will be needed over the longer term. PSR
Chris Fisher is Senior Commercial Vehicle Analyst at Power Systems Research
