Renault has cut its ties with AB Volvo and raised €1.476bn (US$1.92bn) in the process. Given the parlous state of many of Volvo’s core markets at present, divesting its remaining 6.5% stake at just a 3% discount must have caused some rejoicing around the halls of Boulogne-Billancourt.
Renault no doubt has a use for its windfall, but the final separation from Volvo – which came about from the sale of the latter’s eponymous truck business to the former in 2001 – may also prove to be a significant event for the Swedish truck manufacturer.
There now has to be increased discussion in terms of the role that the Renault truck brand will play within the Volvo Group”
The 2001 merger of the two truck OEMs heralded an era of significant change within the global truck market. The combined group took the fight to Daimler in terms of creating a second, scaled global operation, and, by dint of adding a second player to this segment, the merger effectively legitimised the notion of a global truck manufacturing industry. With this shift came numerous changes, not least in terms of the influence of the Tier One suppliers on the European truck market.
There now has to be increased discussion in terms of the role that the Renault truck brand will play within the Volvo Group. Rightly or wrongly, the view that the French government – through its stake in Renault – may have been responsible for what might be deemed a rather less commercial approach to Renault within the Volvo brand portfolio has been one that has never quite gone away. With the influence of the French government now removed, things may change, and the somewhat abrupt departure of Renault’s Heinz-Jürgen Löw at the end of November will only serve to reinforce the view that changes may be afoot.
While we do not link the two directly, the ending of the Renault relationship could now provoke Volvo into a strategic rethink in terms of its supplier base, and one item on its agenda could well be the axle supply deal with Meritor.
The ending of the Renault relationship could now provoke Volvo into a strategic rethink in terms of its supplier base”
The original outsourcing deal – which saw Meritor acquire Volvo’s Lindesberg, Sweden axle plant in 1998 – made, at the time, considerable sense. Fourteen years later, that same logic is rather more escapable. Volvo is now a truck manufacturer with a global footprint, and an apparent desire to be fully vertically integrated. Notwithstanding the issue of keeping powertrain design in-house – increasingly important as we move towards a legislative era defined by CO2 measurement – there is also the rather more fundamental issue of supplier sustainability.
Whereas Volvo in 1998 might reasonably have been concerned about mitigating the impact of the cyclicality in terms of its balance sheet, today it may well be more concerned about ensuring that the components it needs are under its control. The deal with Meritor is up for renewal at the end of 2014. The truck market has changed markedly over the past 14 years, leaving many to wonder if the terms of any new deal might not be too significantly different for the supplier to comply.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Oliver Dixon is Editor, World Truck Analysis.
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