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Volvo buys Mack, Renault truck businesses

GREENSBORO, S.C. -- Mack's famous bulldog has a new master.Volvo AB has taken control of North America's oldest trucking company, acquiring century-old Mack Trucks with its US $2-billion takeover of p...

GREENSBORO, S.C. — Mack’s famous bulldog has a new master.

Volvo AB has taken control of North America’s oldest trucking company, acquiring century-old Mack Trucks with its US $2-billion takeover of parent company Renault VI’s trucking business. In turn, Renault takes 15 per cent of Volvo’s shares, and will maintain the stake for at least three years.

Mack, Renault and Volvo trucks will continue to be marketed under their individual brands, with their own distribution networks. Powertrain work, however, will be merged and a joint engine program will be developed, while product development and research and development operations will also be merged. Several services are also expected to cross over to the different brands.

It’s unknown whether individual engine lines will be merged.

Including Renault VI/Mack, Volvo will become the largest manufacturer of heavy trucks in Europe and the second largest in the world. It becomes the world’s third-largest engine maker. Volvo’s and Renault VI’s combined market share for heavy trucks in North America will hit about 24 per cent, while its Western European share will reach 28 per cent.

Volvo had held the Number 3 spot in the world behind Paccar.

The acquisition still needs to be authorized by Volvo shareholders at the company’s annual general meeting, and is subject to regulatory approval.

In terms of Class 8 trucks, Volvo sold 4,426 units in Canada last year, compared to the 2,858 sold by Mack. Combined, they hold a 23.5 per cent of Canada’s heavy truck market, according to the Canadian Vehicle Manufacturers Association. DaimlerChrysler, meanwhile, holds 33.5 per cent of that market with the combination of Freightliner and Sterling nameplates.

Worldwide, they’ll have an output of 165,000 trucks over five tons.

The markets for Mack and Volvo trucks are quite different, says Volvo Trucks North America president Marc Gustafson. “They’re complementary.” Where Mack has a strong position in vocational markets such as construction, refuse and local and regional operations that buy one to three trucks per year, Volvo has made a name for itself with LTL carriers, private and regional fleets, and some Truckload operations, he says.

Where the two overlap is with Mack’s Vision, which was launched last year in a bid for the on-highway market.

“The Vision has to prove itself and it’s very soon to see what the acceptance is,” Gustafson adds.

Gustafson is in a unique position having once worked for Mack, and in its dealer organization. He wouldn’t confirm, however, whether he will head the combined North American operation. “No organizational changes will be announced until the deal is concluded,” he says.

Volvo will continue with its plans to launch a new vocational truck line in July, Gustafson confirms. “If I could make that go any faster, I would.”

Under the terms of the proposed deal, Louis Schweitzer, chairman and CEO of Renault, and one other person selected by Renault, will be elected to Volvo’s board after the transaction has been completed. Neither Renault VI’s bus business nor its holding in Nissan Diesel of Japan are included in the transaction.

The deal lays to rest wide speculation about what cash-rich Volvo would do.

The company lost its attempt to take over Swedish rival Scania when the European Commission rejected that proposed US $6.9 billion deal, claiming the merger would be anti-competitive. (Italy’s Fiat SpA and its truck maker Iveco is expected to be interested in Scania.) But Volvo is holding on to its Scania shares for now, even though Volkswagen AG has bought a one-third share in the company. Volkswagen AG chairman Ferdinand Piech told Focus, a German magazine, that “one can never predict what is still laying ahead”, referring to German truck maker MAN AG.

Renault has also agreed not to increase its share in Volvo beyond a 20 per cent stake.

“Volvo and Renault VI/Mack complement each other well, both geographically and product-wise,” says Volvo CEO Leif Johansson. “The intended transaction will double our share of the market in north America and will, at the same time, substantially strengthen our positions in markets in Southern Europe and North Africa. The transaction also, together with the cooperation with Mitsubishi, increases Volvo’s competitiveness in the medium heavy truck segment and in heavy diesel engines.

“Mack is one of the world’s strongest brands in the industry and it has its own production of engines, which was a very important factor for us. We intend to achieve further critical mass in the engine sector that will permit us to make aggressive investments that will better enable us to meet demands from our customers and from society.”

“Renault, with 20 per cent of Volvo share capital, will play its role in the future of Volvo and thus securing on a long-term basis its historic presence in the truck sector,” said Renault CEO Louis Schweitzer. “Through its alliance with Nissa, 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 is part of its strategy.

Says Gustafson, “I could not be more pleased than to be involved with Mack again.”

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