Volvo and Renault intend to join forces in the truck sector
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Irisbus, a joint company of Renault V.I. and Iveco in the bus sector, is not included in the scope of the project. Renault VI's holding in Irisbus (50%), as well as Renault VI.'s investments in the CAT (31%) and SOVAB (25%) companies which are not included in the project, will be reintegrated into the scope of the Renault group. The project does not involve Nissan Diesel, in which Renault and Nissan Motors each have a 22.5% stake. Expected profits of Renault VI/Mack until the closing are not included in the scope of the deal either.

As Volvo's largest shareholder, Renault would secure on a long-term basis its presence in the truck sector, under optimum conditions for both Renault VI/Mack's customers and employees, as well as for its shareholders, with strengthened prospects in terms of growth and profitability.

Renault is committed to a global profitable growth strategy. Through its Alliance with Nissan, the acquisition of Dacia and its own international growth, Renault has become one of the key players in the world automotive industry. The truck business will remain part of this strategy through Renault's holding in Volvo.

This strategic move would give Volvo and Renault VI/Mack together around 25% of the American and European markets and a significant presence in other regions of the world, such as Latin America and Asia. With an output of 165,000 trucks over five tons per year and annual revenues on the order of EUR 14.5 billion (FRF 95 billion), the new entity could generate major synergies in the development of new vehicles and mechanical components, as well as in purchasing and investments.

Larger and more cost effective manufacturers, combining several brands, are better fit to face the increasing competition in the world's truck industry and meet customer demands. Benefiting from economies of scale, combined purchasing, industrial efficiency, extended technical expertise, investment capacity and marketing strengths, these groups are able to address successfully new trends in the market structure, with fewer and bigger customers, requesting up-to-date products, financing and after-sales services at the best market value.

Renault VI/Mack has improved its competitiveness, invested in new products and set up a growth strategy. Combined with Volvo, Renault VI/Mack would benefit from the strengths of a powerful enlarged truck manufacturer to speed up this strategy, develop its brands and better secure its future. Renault VI/Mack currently ranks as the world's fourth largest heavy trucks manufacturer, with 70,000 vehicles over 16 tons in 1999, behind Mercedes, Paccar, and Volvo. Combined with Renault VI/Mack, Volvo would become the second largest truck manufacturer in the world and the third heavy diesel engine manufacturer.

Volvo and Renault VI/Mack would retain their respective identities, their brand names, separate sales organizations and assembly plants tied to each brand. Renault VI would continue to be a company governed by French law, with its headquarters and research & development centre based in Lyon (France). The planned agreement does not have any impact on the status and benefits enjoyed by Renault VI/Mack's employees. The project by itself will have no immediate impact on employment, but the new entity with its improved competitiveness is well positioned for future growth.

In addition to the capital gain linked with the completion of the transaction, Renault, which would account for its holding in Volvo in its consolidated financial statements by the equity method, should benefit from the positive contribution of the deal to its recurrent profits from the first year. The transaction would give rise to a capital gain of EUR 1 billion (FRF 6.56 billion) based on the present book value of Volvo. The value of the transaction will depend upon the value of Volvo shares transferred to Renault at the time of the closing.

The Volvo group, in which Renault would play its role as a major shareholder, is focused on transport solutions for commercial use. Its activities are split between the truck business (56% of 1999 revenues), buses (12%), construction equipment (15%), marine and industrial power systems (5%) and aerospace (8%). It employs approximately 53,000 persons and has production activities in almost 30 countries. Its net revenues amounted to SEK 125 billion in 1999. Its operating income totaled SEK 33 billion, of which SEK 26.7 billion from the sale of Volvo Car and SEK 3.9 billion contributed by the truck division.

The project will be presented to employee representative bodies and must be approved by the Boards of Directors of Volvo and Renault. It will also have to obtain the approval of the antitrust authorities in Europe and the United States to come into effect.

(April 25, 2000)