Volvo-Renault Deal Good For U.S., Says Gustafson
April 25, 2000
After seven years of on-again, off-again talks and much speculation, Volvo and Mack will become one by the end of the year. The combined companies will form the world's second-largest truck maker
and a very strong number two in the United States with about a 26% share of the Class 8 market here and 28% share in Western Europe. The deal was announced April 25.
Swedish-based Volvo is paying $1.5 billion, or about 15% of its shares, to acquire the truck division of Renault SA, Renault V.I. Under the agreement, Renault will buy another 5% of Volvo stock on the open market making the total investment in Volvo about $2 billion.
The deal does not include Renault’s bus business or its holdings in Nissan Diesel.
In Volvo’s announcement from Sweden, the new company expects to save $400 million annually after the first two years.
Both companies have strong diesel engine and component capabilities and, combined, will be the world’s third-largest producer of heavy duty truck engines and driveline components.
In a wide-ranging interview, Marc Gustafson, president of Volvo Trucks of North America, said the combined resources of both companies and Volvo’s partial ownership of Petro Stopping Centers and Arrow Used Truck Sales will make the the merger a win-win for truck buyers.
Gustafson has roots which go way back in the Mack organization -- first as a successful Mack dealer in Florida and later as executive VP of sales and marketing for the company.
He said both Volvo and Mack product lines and dealer organizations will be continued and that Mack’s strong customer base in vocational trucking, severe service, refuse and regional distribution complement Volvo’s strengths in the common carrier LTL and truckload sleeper tractor businesses.
Gustafson said "the constellation of services combined with the global experience and local reach of these two great companies will make the new organization a U.S. powerhouse."
He said the most pressing immediate need of all truck and diesel engine manufacturers is to be ready for the 2002 exhaust emission mandates, some 40% below today’s levels.
"Fifty percent of today’s engines and vehicles will be sunsetted for 2002 because of additional engine cooling requirements," he said.
There are no plans to close factories, Gustafson said. "We need the capacities of our Dublin (VA) plant and Mack’s Macungie (PA) and Winnsboro (SC) plants to meet market needs." He also said there were no plans now to close either of the company’s Greensboro or Allentown headquarters, but that down the road there are synergies to be explored with "back office" functions and parts distribution for each company.
Gustafson would not comment on future engine plans for the combined companies. He did say that both organizations already have global R&D groups, Mack’s with Renault V.I., and Volvo’s in Sweden. Greensboro, NC, already is Volvo’s center for chassis development worldwide. Ninety-eight percent of Mack trucks are sold with its 12-liter E-Tech engine. About 20% of U.S.-built Volvo trucks have Volvo-built 12-liter engines.
He said Volvo's new product plans will remain on schedule, including new vocational trucks set for a July introduction.