Sweden's Volvo AB and Japan's Mitsubishi are joining forces to create what could be the world's largest truck and bus business.
Volvo will take a 5% stake in Mitsubishi after the Japanese company issues new shares. Mitsubishi has also agreed to buy a 1% interest in Volvo, building that up to 5% by 2002. At the same time, Mitsubishi will spin off its truck and bus operations into a new subsidiary by 2001, with Volvo taking a 19.9% stake.
Mitsubishi is currently deep in debt, to the tune of $16.46 billion. Some of that is in the truck business, but Volvo will not be exposed to it unless its stake rises above 40-50%.
According to Mitsubishi, the combined size of truck and bus sales of it and Volvo, plus Scania, which Volvo is acquiring, will be the biggest in the world. Some analysts disagree with that figure, putting Freightliner parent Daimler-Chrysler as the largest.
The agreement allows Volvo to substantially strengthen its position in Asia, with both light- and medium-duty trucks. The two have co-operated since 1991.