What's changed at Navistar a year after Traton's $3.7B takeover?

A year after Traton Group's $3.7 billion takeover of Navistar International Corp., the German truck holding company's sway is noticeable in new faces, a bigger push on electric trucks and a decidedly Swedish influence in product development.

Navistar remains a stand-alone brand. Nothing looks different at industry events. In the C-suite scenes, Traton has installed its own leadership team led by Mathias Carlbaum, former Scania executive vice president of commercial operation, as CEO. 

Carlbaum, 49, oversaw post-merger management leading to the July 1, 2021, finalization after Navistar investors Carl Iachn and Mark Rachesky pushed for a higher sale price. Traton ultimately paid $800 million more than its unsolicited $2.9 billion bid in January 2020. 

Volkswagen AG spun off its truck and bus business into Traton in 2018, two years after acquiring 16.68% of Navistar for $256 million. Known at the time as Volkswagen Truck & Bus, the Traton predecessor formed purchasing and powertrain alliances with the No. 4 U.S. truck maker. 

A 5-year road to Traton ownership

Traton was barred from adding to its stake. That forced it to stand pat or go all-in to buy the rest of Navistar. Former Traton CEO Andreas Renschler said a merger with Navistar was a key to Traton becoming a "global champion" in heavy-duty transportation. But he flashed hot and cold on making a deal.

Retired CEO Troy Clarke's relationship with Renschler paved the way. The two appeared together at the North American Commercial Vehicle Show in Atlanta in 2019, months before Traton's initial offer. Clarke stayed on as executive chairman to see the deal completed. Mathias Gruendler succeeded Rentschler for the final act.

Scania CEO Christian Levin became Traton CEO in September. He oversees Traton's portal to the lucrative North American market where rivals Daimler Truck and Volvo Group are well established. 

With Levin and Carlbaum in charge, Scania wields great influence on Navistar. A cadre of former General Motors executives retired, including Clarke and Walter Borst, his chief financial officer. Clarke's successor, Brazilian Persio Lisboa, a 35-year Navistar veteran, became CEO in June 2021 but retired just 14 months later, succeeded by Carlbaum.

Navistar swaps independence for new resources

Surrendering its independence brought new resources Navistar lacked in areas such as electrification. Unlike Daimer, Volvo and Paccar Inc., Navistar does not offer a Class 8 electric truck. It quietly displayed a prototype at the Advanced Clean Transportation Expo in May but did not announce production or call attention to it.

"I wish I could rewrite some of the history, that this would have started earlier, but we are where we are," Carlbaum told FreightWaves in an interview at the ACT Expo. "Coming in as new owners, we're trying to speed up. But on these development plans, if you shave three to six months off, you've done a good job."

In the next sentence, Carlbaum expressed no concern about trailing the pack in offering a Class 8 electric truck.

"When it comes to Class 8, I'm not sleepless that we aren't announcing it this year," he said. "The user case is such that we're getting closer [to] when it's actually feasible." Buzz-generating experimental products won't matter in two or three years.

"When the time comes, we're there."

A Southern focus for Navistar

Navistar assembles its first electric truck – the medium-duty eMV – in a recently opened $250 million plant in San Antonio. The 428-acre site would allow the 920,000-square-foot plant to double in size if warranted.

"They built this big new plant in San Antonio, but they didn't need any more capacity," Stephen Volkmann, managing director of equity research at Jefferies & Co., told FreightWaves. "As an analyst, I'm thinking your capacity utilization is probably kind of low because you added a bunch of capacity but the market didn't grow."

Manufacturing triangle

The manufacturing triangle of Escobedo, Mexico (full-size trucks), a $190 million expansion in  Huntsville, Alabama (powertrains), and San Antonio (medium-duty electric and vocational trucks) looks like the focus of Navistar's efforts.

A medium-duty truck plant in Springfield, Ohio, beset in recent years by labor problems arising from a 2019 strike at General Motors, appears the outlier. Navistar builds medium-duty Chevrolet Silverados and Express cutaway chassis cabs for GM in Ohio.

"I hate to see things get closed down because I like American jobs as much as the next guy," Volkmann said. "But in terms of not over-capacitizing the industry, it almost feels like something has to happen."

Carlbaum acknowledged Navistar could be six to nine months early with San Antonio given ongoing supply chain disruptions affecting all OEMs.

"We're building future capacity," he said.

In January 2021, Navistar announced the sale of its Melrose Park, Illinois, engineering center, laying off 250 workers. Other facilities absorbed about half of the work. Navistar's headquarters in the Chicago suburb of Lisle remains. A move to Texas is possible. A new advanced technology center near the new plant is home to R&D work.

Scania's influence

Studies show many battery-electric medium-duty trucks are at par with diesel on a total cost-of-ownership basis. Building what fleets would buy guided Navistar before Traton. Electrification leadership cost money Navistar didn't have. One person close to the company described Navistar as playing not to lose versus playing to win.

"There's so many paths and choices for investments," Carlbaum said. "We have to find what's our North Star. The opportunities around battery electric are just immense."

In a presentation at the ACT Expo, Carlbaum pegged battery-electric heavy-duty trucks as eventually accounting for up to 65% of the market.  

Traton parent Volkswagen is a major investor in QuantumScape, a startup developing solid state batteries with the potential for greater energy density that could address the long charging times cited as a drawback for battery-electric trucks.

Navistar electric trucks should have the ability to receive up to megawatt capacity charging around 2025 or 2026. "And that's the game charger," Carlbaum said.

Powertrain plans

The company has two hydrogen fuel cell projects that started before Traton took over. Scania is testing 20 fuel cell trucks in Sweden from longtime Navistar engine supplier Cummins Inc.

"There is still a huge proportion that need other solutions, alternative fuels, fuel cells and all of that," Carlbaum said. "We do work in some partnerships that we have established here in the states. We're also open for new ones. If the critical mass is 15%, 20% of the market, we invite these good partners to be part of that."

Navistar in August will reveal an integrated powertrain it will build in Huntsville based on a Scania design.

"We are taking state-of-the-art technology from whoever's in the lead. Right now, Scania is the lead," Carlbaum said.

Delay in first-mover autonomous technology

Navistar surprised many in July 2020 when it announced a partnership with startup autonomous software developer TuSimple targeting a Level 4 autonomous truck in 2024. TuSimple said earlier this year purpose-built truck production had slipped to 2025.

Navistar and Traton both invested financially in TuSimple. And Scania is testing a truck with TuSimple software in Sweden.

"I won't share with you why there's a delay here. But we're finding a way forward that will be robust," Carlbaum said. "We need to do it as a group, as Traton, because such a huge investment is needed from us."

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Click for more FreightWaves articles by Alan Adler.