Image source: Getty Images.


Shares of Navistar International Corporation (NYSE:NAV) are on fire this morning, trading 47% higher after the an announcement of a major investment from Volkswagen Group (OTC:VWAGY).

So what

The deal calls for Volkswagen Truck & Bus to invest $256 million in Navistar at $15.76 per share, and Volkswagen must hold the shares for a minimum of three years. The deal will give Volkswagen a 16.6% stake in Navistar, and the automaker has the right to appoint two directors to Navistar's board of directors.

While Volkswagen is widely recognized as a typical automaker, the company's truck business has long been attempting to get its foot in the door of the North American market, and Navistar's large dealership network here in the States could be just what the doctor ordered.

Navistar has searched for a potential partner after its heavy-duty diesel truck engine wasn't approved by the U.S. Environmental Protection Agency in 2010; now, the German automaker plans to supply Navistar with engines.

Now what

With such a large investment in the company, there are a couple of factors for investors to watch going forward. First, investors will want to see details regarding synergies and cost savings. Navistar expects the VW alliance will generate at least $200 million in savings annually.

Another potential development to watch will be if this is just the beginning of a full merger between Navistar and Volkswagen. When speaking on that very subject, Volkswagen Trucks CEO Andreas Renschler commented, "On our way to becoming a global champion all options are open."  

Ultimately, despite Volkswagen's ongoing diesel emissions scandal, this is a positive development for the automaker and a great partnership for Navistar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.