Volvo-Renault alliance ends: Car makers go separate ways after revolt by shareholders

VOLVO and Renault are to dismantle their alliance agreed in 1990, with Volvo paying Renault up to Fr5.5bn ( pounds 635m). The end of the partnership follows the collapse in December of a planned merger between the automotive groups after a revolt by Volvo shareholders.

Equity links between the companies will be dismantled in stages, beginning with the swap of Volvo's 45 per cent stake in Renault's car business for Renault's 25 per cent stake in Volvo Car Corporation, with no money changing hands.

The parent group, AB Volvo, will then buy back Renault's 45 per cent holding in Volvo Truck Corporation for Fr4.5bn should the transaction take place before the privatisation of Renault, which is expected by the end of this year.

Should the buy-back not take place until privatisation, Volvo will finance the truck transaction with income from the sale of 12 per cent of its stake in the Renault parent group. This would leave Volvo with 8 per cent of the Renault group shares, which Volvo may also sell.

Volvo will pay Renault a further Fr1bn in recognition of the fact that the Swedish group's car business has not performed as well as expected at the time of the agreement.

The dissolution of the alliance still leaves Renault with 3.45 per cent of AB Volvo, which the French group says it regards as an investment and is separate from the partnership. Renault built an 8.27 per cent stake in AB Volvo between 1991 and January this year, when it netted around pounds 208m by selling more than half the shares.

Renault said ending the links would allow both companies to pursue separate strategies, including alliances with other organisations.

Co-operation between the erstwhile partners will continue in the cross-sourcing of components, including engines and gearboxes. Volvo said that co-operation in the marketing of passenger cars in certain markets would also continue.

The groups have already scrapped joint quality control operations and work on the P4 project to develop a vehicle to replace the Volvo 900 and Renault Safrane.

Volvo and Renault representatives on the boards of Volvo cars, Volvo trucks and Renault cars will resign.