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Volvo to become world’s largest heavy-duty truck manufacturer following strategic alliance with Chinese company Dongfeng Motor Group

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 expansion.”
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.
For more stories from the Volvo Group, please visit
AB Volvo has signed an agreement with the Chinese vehicle manufacturer DongfengMotor 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’smedium- and heavy-duty commercial vehicles business. At completion of thetransaction, the Volvo Group will become the world’s largest manufacturer ofheavy-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 offeringexcellent opportunities to both parties,” says Volvo’s President and CEO OlofPersson. “Combining Dongfeng’s strong domestic position and know-how with theVolvo Group’s technological expertise and global presence will offer DFCVexcellent potential for growth and profitability in and outsideChina.”Completion of the transaction is subject to certain conditions, includingthe approval of relevant anti-trust agencies and Chinese authorities. Thepurchase consideration amounts to RMB 5.6 billion. The ambition is to completethe transaction as soon as possible and completion is expected to take placewithin approximately 12 months from today.The transaction with DFG follows the recent agreement between DFG and NissanMotors, in which DFG purchased the medium- and heavy-duty commercial vehicleoperation from the joint venture DFL (owned jointly by DFG and Nissan Motors).The major part of the re-purchased commercial vehicle operation will be includedin the new company, Dongfeng Commercial Vehicles (DFCV). According to theagreement between DFG and Volvo, Volvo will acquire 45% of Dongfeng CommercialVehicles for a total amount of RMB 5.6 billion, subject to adjustments, to bepaid on closure of the transaction. Payment of the purchase price will increaseVolvo’s net debt by approximately SEK 6 billion.
The Volvo Group is the world’s third largest manufacturer of heavy-duty truckswith 180,000 units sold in 2011. Dongfeng was the second largest producer ofheavy-duty trucks in 2011, with total sales of 186,000 units, of whichapproximately 142,000 units were produced by the part of the company that willbe included in DFCV.
“We are pursuing a clear strategy to achieve our vision of becoming the worldleader in sustainable transport solutions,” says Olof Persson. “With thisagreement in place, we take a crucial step toward reaching a number of our keystrategic objectives such as size and growth in Asia.”
In 2011, DFCV reported net sales of approximately RMB 39 billion (pro forma) andoperating income of approximately RMB 1.2 billion (pro forma). DFCV hasapproximately 28,000 employees and sold 142,000 heavy-duty trucks and 49,000medium-duty trucks in 2011 (pro forma).
For the first three quarters of 2012, DFCV’s net sales amounted to approximatelyRMB 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 of2012, 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 companyand consolidated in accordance with the equity method, one-line consolidation,within the Trucks segment.
During 2012, the Chinese market for heavy-duty trucks totaled approximately636,000 vehicles, while the corresponding figure for the medium-duty market was290,000 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 45,500medium-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 trucksequivalent to the European and North American markets combined,” says OlofPersson. “The partnership between the Volvo Group and DFG will strengthen DFCV’salready strong position in China and provide the company with the rightconditions for successful international expansion.”
The partnership with DFG not only provides the Volvo Group with ownership in thelargest heavy-duty and medium-duty truck manufacturer in China, but also offersexcellent opportunities to achieve economies of scale in terms of sourcing,development and production for the Group’s truck operations. There are a numberof areas in which cooperation is planned between DFCV and Volvo, such as enginesand powertrain components, product platforms and purchasing.
“In Dongfeng, we have a partner that we know well, having worked together forseveral years, and with a management team and a product range that we reallyappreciate,” says Olof Persson, Volvo President and CEO. “Joining forces willprovide clear benefits for both parties and the right conditions to develop DFCVinto a competitive and successful international truck manufacturer with healthyprofitability.”
“This partnership will enable us to significantly strengthen the Group’sposition, both in and outside China,” says Olof Persson. “With DFG as a partner,we can improve our position in the increasingly important Chinese market andbecome more internationally competitive by virtue of the Chinese volumes.”
The DFCV management team will consist of eight members, with Volvo nominatingfour of the eight members and Dongfeng the remaining four. Dongfeng willnominate the company’s Managing Director, while Volvo will be responsible fornominating the Chief Financial Officer. The Board of DFCV will comprise sevenboard members and it has been agreed that the Volvo Group will account for threeplaces and DFG four.
The transaction is subject to certain conditions, including approval of relevantauthorities. The ambition is to complete the transaction as soon as possible andcompletion is expected to take place within approximately 12 months from today.

For more stories from the Volvo Group, please visithttp://www.volvogroup.com/globalnews.
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