Renault, Volvo to merge in January

September 07, 1993|By New York Times News Service

PARIS -- After two years of partnership and several months of complex negotiations that were concluded only on Friday, Renault of France and Volvo of Sweden announced yesterday that they would merge on Jan. 1, forming the world's sixth-largest automotive group.

The merger, which had long been rumored and became widely anticipated over the weekend, is aimed at allowing the two companies to weather the severe recession buffeting the European automobile industry. It will also strengthen them as they prepare for the tougher competition that will come when all restrictions on Japanese auto sales in the European Community are lifted in January 1999.

Sixty-five percent of the new group, to be known as Renault-Volvo RVA, will be owned by Renault and 35 percent by Volvo until Renault -- currently owned by the French government -- is partly privatized, perhaps as early as next year. In 1992, the two companies produced a total of 2.45 million vehicles, had combined sales of about $37.5 billion and employed 200,000 people.

The group will continue to market cars and other vehicles under the Renault and Volvo brands, but they will merge their research, planning, production and distribution operations as well as their corporate structure. They predict that this will result in $5.2 billion of savings by 2000.

"The engagement was long and well thought out," Industry Minister Gerard Longuet of France said yesterday, referring to the Renault-Volvo alliance that began in 1991, "and I think it will lead to a successful marriage, a genuine marriage of complete cooperation."

For Sweden, the marriage is perhaps more painful, since Volvo has long been a symbol of the country's industrial prowess. But the merger marks another step in Sweden's gradual economic integration with the European Community, which it hopes to join as a full member in 1995.

Measured by 1992 production, the new group would rank sixth globally after General Motors, Ford Motor, Toyota, Volkswagen and Nissan. Within Europe, it would rank second after Volkswagen and ahead of Fiat and Peugeot and would have about 12 percent of the Western European market. It is likely to be the largest industrial group in France and the 20th largest worldwide.

The merger will have little impact in the United States. Renault withdrew from the American car market in 1987 and has no plans to return, though it will continue to sell trucks through its Mack Trucks unit, based in Allentown, Pa. Volvo still sells cars and large trucks in the United States. But with American sales of about 65,000 cars last year, it controls less than 1 percent of the American auto market.

Volvo controls 83 percent of a truck-manufacturing venture with GM, the Volvo GM Heavy Truck Corporation.

The new group's main focus will be on the highly competitive -- and currently depressed -- European auto market. New car registrations across the European Community last month ended only 5.6 percent lower than in August 1992, because of a surge in British sales, but they were down 16.7 percent from January to August, compared with the period a year earlier.

Over the weekend, under pressure from European manufacturers, Japan agreed again to lower its exports of cars and light trucks to the community in 1993, this time to 980,000

units, down 18.5 percent from 1992.

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