Volkswagen Truck & Bus is buying a minority stake in Navistar for $256 million.
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The two companies also said Tuesday that they will enter a procurement joint venture that will help source parts for both businesses. There will also be technology sharing, with an anticipated emphasis on powertrain technology.
Volkswagen Truck & Bus will acquire 16.2 million Navistar shares at $15.76 per share and will be allowed to name two directors to Navistar's board. Navistar will remain an independent truck, bus and engine company.
Navistar International Corp. expects savings of at least $500 million over the first five years. By the fifth year, the Lisle, Illinois-based company anticipates the alliance will generate annual savings of at least $200 million for its business.
Navistar's stock surged more than 21 percent in premarket trading.