Volvo will pay Renault pounds 120m over failed alliance

RENAULT, the French car maker, has agreed terms under which Volvo of Sweden will pay it Fr1bn ( pounds 120m) in connection with an alliance between the groups which was abandoned earlier this year. The payment is in recognition of the fact that Volvo's car business did not perform as expected when the alliance was agreed in 1990.

Renault said it would issue to Volvo a share, worth a nominal Fr15, for which Volvo will pay Fr999,999,985. To facilitate the deal the French state-owned car maker is to propose a Fr15 capital increase to its shareholders on 31 May.

The payment is one of a series of steps disentangling the complicated relationship between the automotive groups.

A planned merger of Volvo and Renault collapsed in December after a revolt by Volvo shareholders. In February, the groups announced that they would dismantle various equity links between their car and truck operations. Renault has also more than halved its stake in AB Volvo, the parent group, to 3.45 per cent.

Renault, which is expected to be privatised next year, is now seeking other partners. But the group has distanced itself from the type of far- reaching relationship envisaged with Volvo. Volvo is also likely to seek a number of alliances for specific parts of its operations, rather than one all-embracing partnership.