Volvo Acquires 20% of Hertz for $100 Million
The Swedish auto maker Volvo said Wednesday that it acquired a 20% interest in Hertz Corp., the world’s largest car rental company, in hopes of increasing the exposure of Volvo cars worldwide.
Volvo’s North American unit said it paid $100 million in cash for the one-fifth share of Hertz, which it purchased from Park Ridge Corp., a subsidiary of Ford Motor Co.
A Volvo spokesman said the move would raise worldwide exposure for its autos by increasing the number rented through Hertz outlets. Volvos are offered as rental cars in a number of countries but not as frequently in the United States.
Hertz handled nearly 20 million rentals worldwide in 1987 and has a worldwide fleet of more than 400,000 vehicles, about half of them in the United States. It purchases about $2 billion in vehicles each year.
A Ford spokesman said the U.S. auto maker would like to sell even more of its Hertz holding, which it purchased in December from Allegis Corp.
Allegis, now UAL Corp., sold its car rental and hotel segments in order to return to concentrating on United Airlines.
Sales Gain Expected
Ford now holds 60% of Hertz. A management group at the car rental company owns the remaining 20%. The auto maker bought Hertz last year in a defensive move to prevent other Detroit auto makers from gaining the captive customer. Ford products had long been featured at Hertz rental-leasing outlets, and Ford sought to ensure that the relationship would continue.
Volvo is viewed as less of a direct competitor for Ford’s key auto lines.
Bjorn Ahlstrom, president of Volvo North America, said the investment was “a further commitment by Volvo to the United States and will provide us with the opportunity to increase the exposure of our automobiles in the worldwide Hertz rental fleet.”
“In our minds, this is a very, very strong company with a market-leading position in its industry,” Ahlstrom said in an interview.
Ahlstrom said he expects Volvo to gain sales from the exposure its products will receive by being available at Hertz outlets.
“We see incremental advantages in being associated with the company in a field so close to our basic business of producing automobiles,” Ahlstrom said. “By having a presence in a major rental car fleet, more people have an opportunity to test drive a Volvo.”
Hertz Chairman Frank A. Olson, who served briefly as chairman of Allegis after a management shake-up, said he welcomed the Volvo investment. He called Volvo “a world-class organization with first-class products.”
U.S. Is Largest Market
Ford spokesman Donald Sherman said Ford was pleased to have Volvo as an investor and said the auto maker is looking for other buyers as well.
“Our intention is to reduce our investment by expanding our ownership base (to include other owners),” Sherman said. “We are certainly listening to offers.”
He said that while Ford is currently the majority owner, the position could easily change when new investors are found.
Volvo North America had 1987 sales of $3.2 billion, one-quarter of the parent auto maker’s worldwide total, on unit sales of 105,000 automobiles. The United States is its largest market.
But Ahlstrom said he did not expect the impact to come overnight. “That’s nothing that will help sales in July and August. It is something that over time will develop,” he said.
The Volvo executive said the auto maker expects in 1988 to fall slightly short of its 1987 U.S. sales total. He acknowledged European manufacturers have been hurt this year by the weakness of the dollar, which has forced them to raise prices.
“We have right now the toughest situation we have had in recent years because of the currency situation. We have had more aggressive pricing than we would like to have seen and that has resulted in somewhat shrinking margins,” he said.
He would not make a specific sales prediction for 1989 but said he thought the sales would be at about the same pace as in 1988.
“How Volvo and other importers will fare depends to a large extent on international currency situation,” Ahlstrom said.
