Automotive Business Review: Volvo's acquisition expansion

Volvo hopes to increase its market share of heavy trucks in Asia to about 20% to 25% through the acquisition of Nissan Diesel and possible cooperation with Dongfeng.

Truck manufacturers all over the world are facing fierce competition and cost pressures, which forces them to seek a broader market and work hard to meet the increasingly stringent environmental standards in various countries in recent years.

The recent move by AB.VOLVO to accelerate the acquisition of Nissan Diesel was clearly an important move to expand the market and use advanced hybrid technologies.

Since the sale of the sedan business to Ford in 1999, the Volvo Group, which focuses on the development of commercial vehicles, has become the world's largest manufacturer of 9-litre to 16-litre high-horsepower diesel engines. It has also leapt to a position second only to wearing. The world's second-largest heavy truck manufacturer, Muller-Chrysler.

Leif Johansson, chairman of the Volvo Group, has set a goal of 10% growth in sales for the Volvo Group by 2007, and the main measure to achieve this goal is acquisitions.

“The truck market will be reshuffled in the next five years, and eventually only 6-7 truck manufacturers will remain in the world.” In Johnson’s view, the reorganization trend of the global truck manufacturing industry is unavoidable.

The expansion of the market through acquisitions is already very familiar to the Volvo Group. In order to expand the commercial vehicle market outside of Europe, the Volvo Group purchased Renault’s heavy-duty vehicle company and its American subsidiary, Mike, in 2001. This is the largest asset restructuring activity in the international commercial vehicle industry that year.

Given the restrictions of the anti-monopoly law, it is difficult for the Volvo Group to acquire similar companies in Europe or the United States. Therefore, it has to expand a wider market. The acquisition of Nissan Diesel was the Asian version of Renault's expansion of the North American commercial vehicle market.

Asian Channel

In March 2006, the Volvo Group purchased Nissan Diesel's 40 million ordinary shares in the hands of Nissan Motors at a price of SEK 1.5 billion, holding a 13% share, and plans to acquire Nissan’s remaining 6% Nissan Diesel’s shares within four years. . By October, Volvo suddenly increased its weight, completed the acquisition of the remaining 6% of shares in advance, and said that by April 1, 2008, the holding of Nissan Diesel shares was increased to 41.9%; by 2014, the total SEK 3.5 billion was purchased for convertible shares, which further increased the company's holding of Nissan Diesel to 46.5%.

This is a widely expected acquisition, although it came earlier than expected. The inclusion of Nissan Diesel in the future is seen as an important move for the Volvo Group to enter the Asian market in 2006. The management practices of the Volvo Group are completely rule-based.

The past sale of the entire sedan business to Ford Motors laid the ground for this rapid acquisition. Volvo’s shareholders put pressure on Volvo Group’s management through shareholder rights investment funds, hoping to distribute 19 billion Swedish kronor of cash from the sale of its car business to shareholders in the form of special dividends or stock repurchases, but the group’s management It tends to use surplus funds to further expand the scale.

Therefore, there is a disagreement between Volvo Group managers and shareholders on how to use the SEK 19 billion surplus capital. Obviously, the former had the upper hand in the contest.

The market of the Volvo Group in the European region is becoming more and more mature, and its share has also been increasing. The Asian market is disadvantageous for years. The good performance of Nissan Diesel in recent years has increased Volvo Group’s determination to purchase. Johnson said: "Nissan Diesel and Volvo Group can complement each other in terms of products and geographical coverage. This transaction will enable both parties to cooperate in production, sales and after-sales service."

As Japan's fourth-largest manufacturer of heavy and medium-duty heavy trucks, Nissan Diesel has a complete distribution and service network in Japan and Southeast Asia, covering Asia, the Middle East, Africa, Oceania, the United States and Latin America and other countries and regions. Especially in Japan, Southeast Asia, the Middle East and Africa, Nissan Diesel's sales and after-sales service network is quite complete, and more than 90% of its products are sold by its own dealers.

As the biggest winner imaginable, Volvo will be able to benefit from Nissan Diesel’s advanced technologies in hybrid technology and clean diesel engines, in addition to the Nissan Diesel Group’s acquisition of its sales network that it has established over the past 70 years. the cost of. The direct savings came from joint development, product development and purchase amount.

According to estimates, this will allow Volvo to save $26 billion in each of the next five years. According to Jorma Halonen, executive vice president and deputy chief executive officer of Volvo Group and president and chief executive officer of Volvo Trucks, this is roughly equivalent to one-fifth of Volvo’s R&D spending in 2006.

For now, the existing shares are not enough to allow Volvo to arbitrarily control Nissan Diesel's operating activities, especially for Nissan Diesel's overseas factories, but this is obviously only a matter of time. Nissan Chai Chang Chung Nakamura said: "The biggest hope is to grow and grow. From the efficiency point of view, a wholly-owned subsidiary is the most suitable form."

The Volvo Group also held a press conference in Tokyo, Japan, and announced that it expects the annual revenue from its joint venture project with Nissan Diesel to be approximately 200 million euros. Nissan Diesel will receive more than half of the total cooperative income, and the rest will be owned by the Volvo Group.

Undercover

The Volvo Group has accelerated the acquisition of Nissan Diesel in Nissan's hands and will further promote its commercial vehicle construction in China. The Volvo Group already has two joint venture bus companies and a joint venture truck company in China. However, the development of Huawo Trucks, a joint venture with China National Heavy Duty Truck, has been poor, causing it to seek further joint venture partners. A joint venture between Renault Trucks and Dongfeng Liuzhou, a wholly owned subsidiary of the Volvo Group, is an important attempt. However, due to China's auto industry policy, a foreign-owned auto company can only have two joint ventures and has not been approved by the central government.

The Volvo Group turned to find new ways. Obviously, it now hopes to complete its commercial vehicle deployment ambitions in China through the acquisition of all shares of Nissan Motor Co., Ltd.'s Dongfeng Limited commercial vehicle company. Since 2007, the three parties of the Volvo Group, Nissan Motors and Dongfeng Group have stepped up the pace of negotiations.

In 2002, Dongfeng and Nissan included a commercial vehicle project in a full-scale joint venture, but Nissan's own development center is not a commercial vehicle. Just as Renault, the controlling shareholder of Nissan, sold its truck business to the Volvo Group, it would be logical for Nissan to sell Nissan Diesel shares to the Volvo Group. Renault-Nissan is centered on passenger cars, and the development center of the Volvo Group is a commercial vehicle. It has already sold the passenger car business to Ford Motor.

According to the current situation, it is also logical for Nissan to sell its shares in Dongfeng Limited Commercial Vehicles to the Volvo Group.
This does not completely bypass policy barriers. The completion of the acquisition of Dongfeng Limited Commercial Vehicle shares held by Nissan through Nissan Diesel is a feasible solution. Article 48 of the Automobile Industry Policy stipulates that a company that has a legal personality overseas has relatively the same foreign company as it controls another company. However, the Nissan Diesel shares currently held by the Volvo Group do not allow the Chinese government to determine that the Volvo Group and Nissan Diesel are the same foreign companies. There is still room for manoeuvre.

Currently, Nissan Diesel and Dongfeng Limited Commercial Vehicles Co., Ltd. owns Dongfeng Nissan Diesel Co., Ltd., which holds half of the shares each. If other measures fail, capital operation through this company can also be used as a solution.

However, Halonen said that in dealing with the relationship with Dongfeng, Volvo will take the same approach as the purchase of Renault and Mike truck six years ago. However, he added: "There is still a long way to go."

Volvo said that it hopes to increase its market share of heavy trucks in Asia from 5% to 10% today to 20% to 25% through the acquisition of Nissan Diesel and possible cooperation with Dongfeng. Obviously, if Volvo The realization of the idea, then this undoubtedly completed its layout in two important markets in Asia.

"Our joint sales with Asia will increase more than twice as much in Asia," Johnson said in an interview with a Japanese journalist. For Volvo, the goal of sales growth and cost savings is to find a suitable partner. It is crucial. "This is the same with all other industries."