Details Emerge on Renault VI / Mack Acquisition by Volvo
IVsource.net
31 July 2000

In effect, the car side of Renault would become part owner of Volvo, while Renault as a corporation would spin off its heavy vehicle business.  The deal would make Renault Volvo's largest single investor.

According to information on the Mack Trucks website (www.macktrucks.com), this major development is a proactive move to create a strong global partnership, in response to intense global competition in the truck market.  In this environment, economies of scale are crucial in both R&D and international development.  Industry consolidation has been occurring since the 1970's, when 16 heavy vehicle manufacturers were offering products in North America; with this new move, the number of truck OEMs is down to 6. 
 

Strengthening Market Share

According to Volvo, the deal is appealing because they are able to strengthen their market share with cash received in their recent sell-off of Volvo car to Ford.  Renault, in turn, stays in the business in terms of maintaining a major strategic influence.  Volvo and RVI/Mack are seen as complementing each other, both geographically and in terms of product offerings.  For instance, Mack is very strong in the vocational truck market (hauling trucks, cement trucks, etc.) and Volvo holds a larger market share of over-the-road tractors. 

The Volvo - Mack merger is seen as strong; in fact, company officials are hopeful the partnership is not too strong -- so as not to raise anti-trust concerns.

The bulk of AB Volvo's 1999 sales were Volvo trucks (58%), construction equipment (16%), and Volvo buses (13%).  1999 data combining Volvo and RVI/Mack sales shows sales predominantly in Volvo trucks (40%), Renault VI/Mack trucks/coaches (31%), Volvo construction equipment (11%), and Volvo buses (9%).  Sales of the combined company would be in the range of 20B Euro.  Based on the 1999 numbers, the company could be expected to sell over 150,000 heavy trucks and over 12,000 medium trucks annually. 

Number Two Worldwide…. with an eye on Number One

Thus, the new organization would be number one in heavy trucks in Europe, number two in heavy trucks worldwide, number two in heavy trucks in North America, and number three in heavy diesel engine production in the world.  Only Mercedes Group (which includes Freightliner) would sell more trucks, with PACCAR a relatively distant third.  In engine production, Volvo/RVI/Mack would be neck-and-neck with leaders Cummins and Caterpillar/Perkins.

The company stresses that the new AB Volvo brand structure would retain Mack Trucks, Volvo Trucks, and Renault Trucks.    Mack notes the advantages of this arrangement, in that their brand then stays distinct, even as they become part of a larger company, share economies of scale, and blend research functions with Volvo. 

Within the US, Mack and Volvo separately competed for, and were awarded, operational test projects under USDOT's Intelligent Vehicle Initiative program.  They are also both active in the US Army's 21st Century Truck program.  While it is not known at this time whether these programs will be merged in some fashion, it is expected that it will be early 2001 before any significant changes are made at the project level.
 

... See the Mack Trucks web site: www.macktrucks.com.

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