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Volvo Says No More Concessions, Blasts EU

March 7, 2000

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AB Volvo says it has rejected European Union Commission demands for further concessions in it proposed Scania acquisition and will await the final decision later this month.

"The conditions do not exist for Volvo to reach an agreement with the EU competition authority," the company said in a press release that sharply criticized the commission.
The commission's major concerns centered on the monopoly a Volvo/Scania merger would create in Scandanavian countries, Volvo argued that the market for heavy trucks and buses should be viewed as pan-European.
"The industry is highly internationalized and competitive, with customers who operate transnationally," it said. "National laws have been successively harmonized and national restrictions for road transports have been eliminated. This transformation of the conditions for commercial transport has occurrred in a short time and was accelerated by the formation of the EU common market."
The company also pointed out that the commission has taken this view in prior decisions, including the merger of French RVI and Italian Iveco's bus operations and DaimlerChrysler's acquisition of German bus maker Kassboher. Both were approved a few years ago.
"The competitive authority has not applied the same perspective in the review of Volvo's acquisiton of Scania," the Swedish truck and bus manufacturer said. "In Volvo's case, the authority contends that each country in the EU should be viewed as a separate market."
Prior decisions by the EU commission "must be prejudicial, particularly since the development in recent years has been toward further liberilzation and internationalziation," it continued. "In Volvo's opinion, it is unacceptable that certain manufacturers from large countries are covered by one interpretation of the EU competition rules, while certain manufacutarers in samll countries are covered by another."
Volvo confirmed earlier reports that both it and Scania has offered to open their dealer service networks to other nameplates. Volvo has also offered to sell its 38% stake in Bilia AB and to drop the Scania name on trucks and buses sold in Sweden, Finland, and Norway for two years. In a later proposal to the commission, however, it withdrew that last two offers but said it would reduce the combined Volvo/Scania market share by 15 percentage points in Sweden and Norway, and 10 percentage points in Finland.
As an alternative to guaranteed market shares, Volvo offered to let competitors take over a large number of dealers in Sweden, Norway and Finland.
In negotiations with Volvo, the commision presented several other possibilities:
* Volvo could divest Scania's bus operations.
* Volvo would be banned from using the Scania nems for trucks in Sweden, Norway, Finaland, Denmark and Ireland.
* Distribution of Scania's products in Sweden, Norway, Finland, Denmark and Ireland be transferred to competitiors for 7 years.
* All Volvo and Scania owned dealerships in Sweden, Norway, Finland, Denmark and Ireland would be sold to competitors.
"These are measures that do not stand in any reasonable proportion to the scope of the problem," said Volvo CEO Leif Johansson. "There is a risk that this measure would also destroy Volvo's and Scania's operations outside the countries convered and, naturally it is totally out of the question that we would be involved in such actions. As a matter of fact, it appears that currently there are no concessions in any respect tht could satisfy the demands of the authorities."
Volvo is expected to announce shortly that it is considering other options for global expansion. According to the Financial Times of London many European investment bankers believe the company will again approach Navistar International or MAN. Asian expansion may come through a tie-up with Mitsubishi.

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