Is Volvo shifting gears?

STOCKHOLM, Sweden (Jan. 18) — Volvo AB’s purchase of 13% of Swedish rival Scania AB for $666 million US last week along with confirmation that the company is listening to offers for its car division should not be construed that Volvo will make trucks its primary focus, said company CEO Leif Johansson.

“On the commercial (vehicle) side, we are No. 2 in the world and on the car side we are No. 23, making 400,000 cars with a successful niche strategy,” Johansson told reporters at a meeting to announce the Scania acquisition.

“We don’t see the same opportunities to make acquisitions on the car side as we do on the commercial side and therefore the commercial side will grow quicker.”

Johansson explained that the purchase of Scania shares — and Volvo’s declared intent to acquire controlling interest in the company — is a matter of “how to be strong in markets where both of us are small.”

A combination of Volvo and Scania, Europe’s fourth-largest truck maker, would create the largest manufacturer of heavy trucks and buses on the continent.

“We have a unique situation, in the sense that both companies are very alike when it comes to industrial structure and product structure,” Johansson added. “We feel that we have synergies across a wide range of the value chain — in product technology, in development, in manufacturing and in marketing.”

In order to take advantage, Volvo will have to convince Scania’s largest shareholder — a holding company controlled by a single family in Sweden — to sell.

Scania’s largest market is Brazil, where sales fell 20% in 1998 and the currency was devalued amid economic troubles

Last week, Volvo confirmed it was talking with Italy’s Fiat SpA and other companies about a possible merger, according to a Reuters news report. Volvo’s information director, Per Lojdquist, told Reuters that Fiat was one of several companies with which the Swedish group was having discussions, and stressed the talks were part of a wide-ranging review of options.

Other companies that may be talking to Volvo about a merger include Ford Motor Co. and Volkswagen AG. Ford officials said recently that any talks would only involve the car division. Ford got out of the heavy-truck business when it sold its AeroMax, Louisville, and Cargo products to Freightliner Corp. in 1997.

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