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.
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