NEW YORK (AP) -- Navistar International Corp.'s stock slumped more than 10 percent on Tuesday as a pair of analysts said that there may be some hurdles in the way of Volkswagen or Fiat potentially buying a stake in the heavy trucks and engine maker.
THE SPARK: Volkswagen AG is said to be in the early stages of considering purchasing a stake in Navistar, according to a Sunday report by the Financial Times Deutschland. The automaker is reportedly mulling the purchase in part so that it can compete better against companies like Daimler.
Fiat Chairman Sergio Marchionne also came out on Friday saying that the Italian company may be interested in Navistar because it wants a slice of the U.S. truck market.
BACKGROUND: It was also disclosed in a regulatory filing on Friday that billionaire investor Carl Icahn boosted his stake in Navistar. Icahn, known for buying and shaking up struggling companies with mixed success, originally bought a 9.8 percent stake in Navistar back in October. Icahn raised his stake to 11.9 percent on Friday, a day after the Lisle, Ill., company posted a $172 million second-quarter loss and cut its full-year guidance to a level well below Wall Street expectations.
Icahn had previously pushed for a merger between Navistar and rival Oshkosh Corp. without much success.
THE ANALYSIS: David Leiker of R.W. Baird said in a client note that both Germany's Volkswagen and Italy's Fiat already have some deals in the works which they will likely need to close on before either one could possibly move forward on a Navistar transaction.
There's also an underfunded pension and other factors to consider, he added.
Leiker kept a "Neutral" rating and $30 price target.
Sterne Agee & Leach's Jeffrey Kauffman said that another obstacle is Navistar's military business because the Defense Department has provisions in place banning any company under foreign control, ownership or influence from getting facility security clearance. This would pose a problem for both Volkswagen and Fiat.
If either party is truly interested in Navistar, Kauffman said, progress on a potential deal could be slow, as both Volkswagen and Fiat are likely not too far along in their evaluation of the transaction.
The analyst maintained a "Buy" rating and $50 price target.
SHARE ACTION: Navistar declined $2.96, or 10.3 percent, to $25.78 in afternoon trading. The stock has traded in a 52-week range of $20.21 to $58.50.