Volvo, Renault Swap Stock to Hone Competitive Edge

Sweden’s car maker Volvo and Renault, the French state-owned automotive concern, today announced acquisition of major equity stakes in each other’s car and truck production operations in a bid to become more competitive.

The companies said they also intend to enter into an “extensive cooperation agreement” under which they will coordinate product development programs, purchasing operations and investment plans.

But they said each company will maintain its trademarks and distribution organizations and will continue assembling and marketing its own cars, trucks and buses.

The announcement in the Dutch capital capped months-long rounds of negotiations between the two companies, whose sales have been under pressure in an increasingly competitive world market.

Under the agreement, Volvo and Renault will swap 45% of the shares in their truck and bus operations and exchange 25% of stock in their car divisions, according to Raymond Levy, Renault’s chief executive officer.

Pehr Gyllenhammar, president of Volvo, said the agreement means both companies will “maintain their integrity . . . and will give them the size, breadth and depth well above the critical mass necessary to survive in this fiercely competitive industry.”

The stock swap covers an auto conglomerate that will account for production of about 2.3 million units a year, or about 20% of the European market, analysts said.

The combination will produce more than 155,000 trucks, beating the current leader in that field, Daimler Benz of West Germany, by a margin of 40,000 units.