Sweden-based AB Volvo, the parent company of both Volvo Trucks North America and Mack Trucks Inc., believes its 19% stake in Japanese truck manufacturer Nissan Diesel should result in “synergy gains” equal to $256.5 million annually (200 million Euro) within five years. Nissan Diesel will realize over half of that gain while the remainder will be within Volvo Group, AB Volvo said.
“The largest economies of scale, and those that are the easiest to realize, are within purchasing of components, in which Nissan Diesel will primarily benefit from the positive effects of the increased volumes,” said Jorma Halonen, deputy CEO of Volvo and responsible for the Group’s international expansion. “Other areas in which positive synergies will arise are in product development, engines and drivelines, as well as distribution and sales.”
The Volvo Group, the commercial truck arm of AB Volvo, purchased 13% of the votes and capital in Nissan Diesel in March from parent company Nissan Motor, with an option to acquire an additional 6% within four years.
At the end of September, this option was exercised, bringing Volvo’s stake up to 19% with Volvo acquiring 57.5 million preference shares in Nissan Diesel. Once those preference shares are converted in phases starting in 2008, Volvo’s ownership interest in Nissan Diesel will rise to 41.9% and then to 46.5% by 2014, the company said.