Management & Operations

Volvo Buys Scania as World Bus Industry Continues to Consolidate

Posted on August 6, 1999

The number of bus companies in the world continues to get smaller as Volvo has announced that it has acquired the other Swedish bus builder Scania. The merger will create the world’s second-largest manufacturer of trucks and buses after DaimlerChrysler. Volvo has been interested in Scania for years. However, that had been owned by Investor AB, the investment arm of Sweden’s powerful Wallenberg business family, had opposed the deal until now. Investor AB owns a 49% stake in Scania; it is this share that Volvo bought, which gives Volvo 69.6% of the votes in Scania. The deal cost Volvo $7.4 billion. The reason the Wallenbergs changed their mind is unclear, but some believe that they finally realized that Scania would be acquired sooner or later and that this would be the best deal they good get for Swedish workers at Scania. “The alternative would have been a foreign buyer and the rationalization that would have then taken place would have hit Sweden,” explained Volvo board chairman Lars Ramqvist. In 1998, Scania’s sales were $5.6 billion and Volvo’s sales were $10.2 billion. Meanwhile, DaimlerChrysler’s bus units, Mercedes-Benz, Freightliner, Sterling and Setra, increased its sales by 18 % to 270,500 units (which also includes trucks). Management was particularly impressed by the division’s performance in North America, and the contribution of the new Sterling and Thomas Built brands. By contrast, things do not look so good for Asian bus builders. The Japan Automobile Manufacturers’ Association reported that for the month of June, production of buses fell 2.5% to 4,331. Renault, which has invested heavily in Nissan this year, has also announced that it intends to re-enter the North American marketplace on its own, which appears to be a signal that its patience with its Japanese investment might be coming to an end.

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