Volkswagen’s $1.6 billion investment in Scania, which comes on the heels of the failed Volvo/Scania merger, gives the German car maker a line of heavy trucks and buses — something it has reportedly wanted for some time. European Union authorities vetoed Volvo’s plan to buy Scania because of monopoly concerns.
DaimlerChrysler announced Monday that it has signed a letter of intent to buy approximately 34% of Mitsubishi. The two companies say they’ll form an alliance regarding the design, development, production and distribution of passenger cars and pickup trucks, creating the world’s third largest automaker behind General Motors and Ford Motor Co. Big trucks don’t seem to be in this picture, but that’s not yet entirely clear.
Last October, Volvo agreed to acquire approximately 20% of Mitsubishi’s commercial vehicles operation and purchase 5% of Mitsubishi stock. A Volvo executive told the Financial Times of London that they have been assured by Mitsubishi that the alliance will proceed as planned. He added that the DaimlerChrysler negotiations come just before Mitsubishi is due to spin off its truck and bus division and deepen ties with Volvo.
However, some financial analysts say DaimlerChrysler wouldn’t make the $2 billion investment in Mitsubishi if trucks weren’t part of the deal.
“It is the hottest single button and the one thing that is the most glaring hole in the U.S.-German car makers portfolio,” one told the Financial Times. Another report said that, under Japanese law, DaimlerChrysler will have the power to veto board decisions.
Officials of Mitsubishi and DaimlerChrysler say that the two companies will be managed independently. DaimlerChrysler forecasts that the Asian auto market will grow 10% a year, making it the fastest expanding market in the world. The union with Mitsubishi is expected to boost DaimlerChrysler’s auto market share in Asia from the current 3% to 25% over the next eight years.
Mitsubishi, Japan’s fourth largest auto maker, has been hit hard by the country’s economic downturn, which forced other Japanese auto and truck manufacturers to seek foreign partners. Last year France’s Renault bought a controlling stake in Nissan Motor. Ford bought a controlling interest in Mazda in 1996. General Motors owns stakes in Isuzu Motors, Suzuki Motor, and has plans to take a 20% chunk of Fuju Heavy Industries, which makes Subaru cars.