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August 2010 Baselines - The Story of Volvo Trucks

Long Before Safety, Seatbelts, And Station Wagons-Volvo Built Its Brand On Commercial Trucks

Text By Bill Senefsky

Big, Big Changes
Sweden's economy was in big trouble by 1990. With its export sales slowing, many established concerns went under. This same year brought about the control of Saab by General Motors. Volvo signed a cross-ownership agreement with Renault for the sharing of research and development for its automotive operations. The company's earlier pharmaceutical and food businesses were merged into a government-controlled holding company known as Procordia AB.

The Volvo 940 and 960 automotive series were launched, along with the radical five-cylindered 850. The company entered into a vastly unpopular agreement with Mitsubishi, allowing the latter to manufacture parts for automobiles it planned to produce in France. The French, being protective as usual, resented the move.

Volvo posted a massive loss of $469 million in 1999, and another $416 million loss was posted the following year. A full merger with Renault was on the table but was voted down at the board level. The long-term result was the Renault connection quietly dissolved by 1994. This same year found Volvo focusing on engine and vehicle platform production. Its earlier food, financial, and drug businesses had now been sold. Its joint venture with the Clark Company and VME was purchased and branded: Volvo Construction Equipment.

With automotive sales slipping in North America, the company decided to move into the luxury market with its first entrant, the C70 series in 1997. That same year, Volvo sold its remaining 11 percent interest in Renault.

Volvo Trucks North America
Champion Road Machinery from Canada was purchased along with the entire operations of Volvo's joint venture with GM Heavy Duty Truck Corporation. Volvo Trucks North America was officially formed. In 1998, the company purchased the Samsung Heavy Equipment business. This excavator line was merged into Volvo's South Korean operations.

By far, the year 1999 brought huge changes for Volvo. First, the company purchased 13 percent of its Swedish truck rival Scandia AB (Saab's truck business), with the intention of fully merging the two firms. Then, deciding to focus entirely on the heavy commercial market, the company sold its Volvo automotive business to Ford Motor Company in March 1999 for $6.5 billion. This sale of the automotive brand included Volvo logo rights to be used on cars, along with light- and medium-duty trucks. Company factories in Belgium, Sweden, and the Netherlands were also included in the sale.

The earlier Scandia deal continued with a suggested sale price of $7 billion but, fearing a monopoly, government pressures killed the deal in April of 2004. Another purchase was attempted in 1999, for a 5 percent stake in Mitsubishi Motors' bus and truck business. This deal failed when DaimlerChrysler purchased a greater stake a few months later.

Undaunted, Volvo purchased the assets of Renault SA's heavy-truck business in 2000. The United Sates-based Mack Trucks were part of the package. This $1.59 billion venture made Volvo Europe's largest commercial truck maker and immediately brought it to number two in North America-which meant Volvo was the second largest builder of heavy-duty trucks in the world.

Despite continued changing economic conditions, the company expanded its Volvo, Renault, and Mack brands. New plants have been constructed in Eastern Europe and China. The company's construction business is now ranked third worldwide. Only Caterpillar and Komatsu remain ahead.

Volvo has come full circle since its founding at the beginning of the last century. Though automobiles were produced in limited numbers first, truck production was always Volvo's most profitable entity and remains so today.

By Bill Senefsky
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