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When empires collide...
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Volvo has just extended its share of Nissan Diesel; Nissan CVs are also
to be sold on Volvo and Renault Truck forecourts. What's going on?
Oliver Dixon seems to know...
hike Carlos Cihosn,CE0 of Renault 7 and Nissan, wanders the floors at the Paris Auto Show trying to decide on a tie-up with either GM or Ford, the rest of the Nissan empire is also having a bit of a spring clean.
Clearing out the garage, Nissan Motor (NM) has decided to get rid of that last bit of truck manufacturer Nissan Diesel it's had kicking around behind the freezer for a number of years, NM had 6% of Nissan Diesel worth around £36.5m — and Volvo has now exercised its option to buy this. In March NM offloaded a 13% stake in Japan's fourth biggest truck maker to Volvo, and granted Volvo a four-year option on the remainder.
It is interesting that Volvo should seek to exercise this option now. Nissan Diesel has spent much of the past decade staring into the abyss and. despite a marked improvement over the past couple of years, it remains in the convalescent ward.
We suspect Volvo's readiness to reach for the corporate chequebook may have had something to do with giving Christer Gardell a poke in the eye. Garde]] runs the Cevian Capital fund. He is currently demanding change at the Swedish firm and, as such, is Volvo CEO Leif Johansson's most prominent bete now.
In effect,Gardell wants a piece of Volvo's cash pile; Johansson has chosen instead to buy a bit more of Nissan Diesel.
Majority stakes
So what has Volvo got for its money? Nissan Diesel holds minority stakes in operations based in the Philippines,Pakistan,Thailand and Indonesia, More pertinently, it holds majority stakes in its operations within three key markets: the US, where it operates as UD Trucks; South Africa;and China.All three have huge potential and the South African market has gone off like a rocket in the past couple of years.
On the other hand. UD's performance in the US is far from stellar — although in fairness it isn't involved with the bloodbath that is brewing in the Class 8 (heavy-duty truck) sector.
A lot of hot air
China is a different matter. Nissan Diesel has a 50% lump of Dongfeng Nissan-Diesel (DEND), a joint venture established to produce heavy trucks for the Chinese market.Assessing the intrinsic value of any Chinese investment is nigh-on impossible —we've heard a lot of hot air about the Chinese market's potential, but we've yet to see any money.
However,Volvo wants in and,having recently been asked to remove its hand from the knee of China National, has been looking for another oriental paramour. DFND may be just that.
So much for Volvo; what about Nissan Motor? In our assessment, it comes out of this deal in very good odour.
Not only has it rid itself of Nissan Diesel and pocketed a reasonable pile of cash for the same, it has also got itself a spot on Volvo Truck forecourts (in some ELI territories) for its light CV range (see box).
Given its 2005 Value-Up three-year business plan, N issan needs footprint. It aims to double global light CV operating profit to 8% and boost global sales by 40% to 434,000 units by the end of its 2007 financial year.
Volvo wins here as well; a 10-15% downturn at the heavy end of the EU market next year would hit Volvo hard, and its dealers need products to sell that people want to buy.
The light CV sector is a paragon of robustness when compared with the flighty heavyweight sector, so a bit of incremental footfall will no doubt be welcomed.
But the Nissan range to be offered through the Volvo network is not restricted to light CVs. it will include Cabstar, Interstar and Atleon models ranging from 2.8 to 15 tonnes GVW.
The heavier end of this line-up begins to infringe on Volvo's recently launched FL/FE family and, more worryingly, its apparent tilt towards the retail buyer with CityTruck.
Tangled network
But there is another story here. Renault and Nissan are effectively one and the same beast, with the former owning more than 40% of the latter, and a tangled network of cross shareholdings between the two.
Ghosn apparently wants in on North America, either through GM or Forcl.With one absolute and one reasonable truth established, we have to wonder how core truck manufacture is to the Renault-Nissan alliance —which is itself Volvo Trucks' single biggest shareholder.
Announcing the divestment of its Nissan Diesel shares 18 months ago, Renault SA gave a clear indication of its thinking: "Given the successful revitalization and the fact that Nissan Diesel has always been a non-strategic investment for Renault, Renault has decided to divest its shares."
Does this mean that N DM had no strategic value to Renault SA or was the release issued on 8 March 2005 — more a veiled reference to a desire to get out of trucks altogether? •