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Volvo buys 6% stake in Nissan Diesel

Volvo AB, Europe's second-largest truckmaker, said it spent 4 billion kronor (US$553 million) buying Nissan Diesel Motor Co shares in a transaction that will eventually increase its stake to 46.5 percent.

Volvo exercised an option to buy a 6 percent stake in Nissan Diesel from Nissan Motor Co for 500 million kronor, raising its holding in the truckmaker to 19 percent, the Swedish company said in a statement. Volvo also bought 57.5 million preferred shares, which will be converted into ordinary shares starting in 2008, for 3.5 billion kronor.

"We foresee possibilities for coordination gains between Nissan Diesel and the group's other truck companies, but before we proceed further, we want to be the clearly largest owner in the company," Volvo chief executive officer Leif Johansson said in the statement.

Johansson said in July that Volvo will focus on expanding in Asia, where demand for commercial vehicles is growing faster than in western Europe. Nissan, Volvo and Nissan Diesel have plans to cooperate on commercial vehicles with Dongfeng Motor Co (東風汽車), China's third-largest assembler, and challenge DaimlerChrysler AG, which plans to start making trucks in Beijing this year.

Volvo said in March it was buying 13 percent of Japan's smallest maker of commercial vehicles from Nissan Motor to increase sales in Japan, China and Southeast Asia. Volvo paid 1.5 billion Swedish kronor in cash for 40 million Nissan Diesel shares, becoming the largest investor, and said then it had a four-year option to buy Nissan Motor's remaining 6 percent stake.

The Swedish company follows DaimlerChrysler, the world's largest truckmaker, in buying a Japanese truckmaker to seek growth in Asia. DaimlerChrysler took control of Mitsubishi Fuso from its former parent Mitsubishi Motors Corp, paying ?141 billion yen for a 65 percent stake. It received another 20 percent as compensation for hidden defects at the truckmaker.

Nissan chief executive officer Carlos Ghosn, who revived debt-ridden Nissan Diesel in 1999, said in March there was little benefit for Japan's second-largest carmaker to remain a shareholder in the truck affiliate.

The Japanese carmaker, which may post its seventh year of record profit this year, has a "clear policy" of owning at least 40 percent of any affiliate and selling off smaller holdings in businesses it doesn't want to control. Nissan is focusing on light trucks and commercial vehicles instead of heavy trucks.

About 82 percent of Nissan Diesel's sales come from mid-size and heavy trucks, with the remaining 18 percent from small trucks developed with Nissan, according to Iwao Nakamura, president of Nissan Diesel.

"This shows Nissan's commitment to its own light commercial-vehicles," said Koji Endo, a Credit Suisse analyst in Tokyo with an "outperform" recommendation on Nissan. "This has gone pretty much according to Ghosn's plan."

Volvo sold its car operations to Ford Motor Co in 1999 to focus on the more profitable business of making commercial vehicles and it now also owns the Renault RVI and Mack truck brands. Volvo in 2001 sold a 3.3 percent stake in Mitsubishi Motors Corp, which at the time built both trucks and cars, to DaimlerChrysler.

Renault SA, France's second-largest carmaker, owns 44.3 percent of Nissan and 20 percent of Volvo, a stake it received in 2000 when it sold the Renault truck brand to the Swedish company. Ghosn is CEO of both Renault and Nissan.

Volvo in March appointed deputy chief executive officer Jorma Halonen to Nissan Diesel's board. Halonen has since assumed the position of vice chairman of Nissan Diesel's board and, with a specifically appointed team, investigated the possibilities of coordination between Nissan Diesel and the Volvo Group.

"The preliminary conclusions of this work are highly positive," Halonen said in yesterday's statement. "We foresee favorable possibilities for coordination and economies of scale in the development of products."

Volvo bought three classes of preference shares, which may be converted between 2008 and 2014 and after full conversion represent 165.1 million shares, the truckmaker said.
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