AB Volvo has signed an agreement with the Chinese vehicle
manufacturer Dongfeng Motor Group Company Limited (DFG) to acquire 45%
of a new subsidiary of DFG, Dongfeng Commercial Vehicles (DFCV), which
will include the major part of DFG’s medium- and heavy-duty commercial
vehicles business. At completion of the transaction, the Volvo Group
will become the world’s largest manufacturer of heavy-duty trucks.
"This is a very exciting venture that will combine the best of two
worlds, strengthening the positions of the Volvo Group and Dongfeng and
offering excellent opportunities to both parties,” says Volvo’s
President and CEO Olof Persson. "Combining Dongfeng’s strong domestic
position and know-how with the Volvo Group’s technological expertise and
global presence will offer DFCV excellent potential for growth and
profitability in and outside China.”Completion of the transaction is
subject to certain conditions, including the approval of relevant
anti-trust agencies and Chinese authorities. The purchase consideration
amounts to RMB 5.6 billion. The ambition is to complete the transaction
as soon as possible and completion is expected to take place within
approximately 12 months from today.
The transaction with DFG follows the recent agreement between DFG and
Nissan Motors, in which DFG purchased the medium- and heavy-duty
commercial vehicle operation from the joint venture DFL (owned jointly
by DFG and Nissan Motors). The major part of the re-purchased commercial
vehicle operation will be included in the new company, Dongfeng
Commercial Vehicles (DFCV). According to the agreement between DFG and
Volvo, Volvo will acquire 45% of Dongfeng Commercial Vehicles for a
total amount of RMB 5.6 billion, subject to adjustments, to be paid on
closure of the transaction. Payment of the purchase price will increase
Volvo’s net debt by approximately SEK 6 billion.
The Volvo Group is the world’s third largest manufacturer of heavy-duty
trucks with 180,000 units sold in 2011. Dongfeng was the second largest
producer of heavy-duty trucks in 2011, with total sales of 186,000
units, of which approximately 142,000 units were produced by the part of
the company that will be included in DFCV.
"We are pursuing a clear strategy to achieve our vision of becoming the
world leader in sustainable transport solutions,” says Olof Persson.
"With this agreement in place, we take a crucial step toward reaching a
number of our key strategic objectives such as size and growth in Asia.”
In 2011, DFCV reported net sales of approximately RMB 39 billion (pro
forma) and operating income of approximately RMB 1.2 billion (pro
forma). DFCV has approximately 28,000 employees and sold 142,000
heavy-duty trucks and 49,000 medium-duty trucks in 2011 (pro forma).
For the first three quarters of 2012, DFCV’s net sales amounted to
approximately RMB 22 billion (pro forma) and operating income to
approximately RMB 0.3 billion (pro forma). During the same period,
81,000 heavy-duty trucks and 35,000 medium-duty trucks were sold by DFCV
(pro forma). At the end of the third quarter of 2012, DFCV had net
financial debt of approximately RMB 500 million (pro forma). The AB
Volvo holding in DFCV is expected to be reported as an associated
company and consolidated in accordance with the equity method, one-line
consolidation, within the Trucks segment.
During 2012, the Chinese market for heavy-duty trucks totaled
approximately 636,000 vehicles, while the corresponding figure for the
medium-duty market was 290,000 vehicles. DFCV occupied a leading
position in China in both the heavy- and medium-duty segments, with
sales of 102,000 heavy-duty trucks and 45,500 medium-duty trucks,
corresponding to market shares of 16.1% and 15.7%, respectively.
"China is the world’s largest truck market with a total market for heavy
trucks equivalent to the European and North American markets combined,”
says Olof Persson. "The partnership between the Volvo Group and DFG will
strengthen DFCV’s already strong position in China and provide the
company with the right conditions for successful international
The partnership with DFG not only provides the Volvo Group with
ownership in the largest heavy-duty and medium-duty truck manufacturer
in China, but also offers excellent opportunities to achieve economies
of scale in terms of sourcing, development and production for the
Group’s truck operations. There are a number of areas in which
cooperation is planned between DFCV and Volvo, such as engines and
powertrain components, product platforms and purchasing.
"In Dongfeng, we have a partner that we know well, having worked
together for several years, and with a management team and a product
range that we really appreciate,” says Olof Persson, Volvo President and
CEO. "Joining forces will provide clear benefits for both parties and
the right conditions to develop DFCV into a competitive and successful
international truck manufacturer with healthy profitability.”
"This partnership will enable us to significantly strengthen the Group’s
position, both in and outside China,” says Olof Persson. "With DFG as a
partner, we can improve our position in the increasingly important
Chinese market and become more internationally competitive by virtue of
the Chinese volumes.”
The DFCV management team will consist of eight members, with Volvo
nominating four of the eight members and Dongfeng the remaining four.
Dongfeng will nominate the company’s Managing Director, while Volvo will
be responsible for nominating the Chief Financial Officer. The Board of
DFCV will comprise seven board members and it has been agreed that the
Volvo Group will account for three places and DFG four.
The transaction is subject to certain conditions, including approval of
relevant authorities. The ambition is to complete the transaction as
soon as possible and completion is expected to take place within
approximately 12 months from today.
January 26, 2013
Information about press conference and
There will be a press conference in Beijing hosted by the Volvo Group
and Dongfeng Motor Group Company Limited followed by a webcast with
Volvo management. The press conference is today at 11.00 a.m. Chinese
time (3.00 a.m. CET) at the InterContinental Beijing Beichen Hotel.
At 11.00 a.m. CET the Volvo Group will hold a webcast with Olof Persson,
President and CEO of the Volvo Group. To view the webcast and down load
the presentation material, please visit www.volvogroup.com/investors.
You can also dial in using the following numbers:
SE: +46 (0)8 506 307 79 UK: +44 (0)844 571 8957 US: +1 866 682
To download images please visit the Volvo Group image
For more stories from the Volvo Group, please visit http://www.volvogroup.com/globalnews.
The Volvo Group is one of the world’s leading manufacturers of trucks,
buses and construction equipment, and drive systems for marine and
industrial applications. The Group also provides complete solutions for
financing and service. The Volvo Group, which employs about 115,000
people, has production facilities in 20 countries and sells its products
in more than 190 markets. In 2011, annual sales of the Volvo Group
amounted to about SEK 310 billion. The Volvo Group is a publicly-held
company headquartered in Göteborg, Sweden. Volvo shares are listed on
OMX Nordic Exchange Stockholm. For more information, please visit www.volvogroup.com
if you are using your mobile phone.
AB Volvo (publ) is required to disclose the information provided herein
pursuant to the Securities Markets Act and/or the Financial Instruments
Trading Act. The information was submitted for publication at 02:30 a.m.
on January 26, 2013.
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