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Mitsubishi Motors Corporation (MMC) and AB Volvo (Volvo) have signed a Master Alliance Agreement (Agreement) today, December 13, 1999. The Agreement was signed by Mr. Katsuhiko Kawasoe, President of MMC and Mr. Leif Johannson, President of Volvo in the city of Maastricht in the Netherlands. On Oct. 8, 1999, in order to further strengthen their worldwide cooperation in the areas of truck and bus development, production and sales, the two companies signed an agreement regarding their intention for a mutual capital tie-up and a Letter of Intent (LOI) regarding a strategic business alliance. Since then, both companies have been negotiating the details of their strategic business alliance and today's Agreement finalizes the terms of their alliance.
On November 30,1999, Volvo purchased 48,516,000 shares of MMC's newly issued common stock (a 5% interest in MMC) in the form of a third-party allocation, for 29 billion yen.
With the signing of the Agreement, MMC and Volvo have established a strategic alliance which will allow them to realize a broad range of cooperation in the areas of truck and bus development, production and sales. This alliance will prepare both companies for the challenges of the international truck and bus market of the 21st century by strengthening their mutual operations and enhancing their competitiveness.
The strengthening of this cooperation will enable MMC to reduce and share the burden of product and technical development costs, expand sales in Europe and strengthen its position in the truck markets, such as South America. Volvo will be able to strengthen its position in the Asian truck and bus markets where potential for considerable growth can be seen in the long term.
The following are the details of the Agreement:
- The formation of a new truck and bus subsidiary by MMC, and the purchase of a capital stake in the newly formed subsidiary by Volvo.
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(1) |
As the first step towards the formation of a new truck and bus subsidiary, MMC will establish an internal division for its truck and bus business by April 1, 2000. |
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(2) |
The next step will be the establishment of a new subsidiary by MMC by the end of 2001, and the transfer of MMC's operations relating to the development, production and sale of trucks and buses to that new subsidiary. |
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Volvo intends to acquire up to19.9% of the shares of this new subsidiary. |
- Exchange of non-management board members.
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MMC will appoint two non-management board members to Volvo's truck and bus subsidiaries and Volvo will appoint two non-management board members to MMC's new truck and bus subsidiary. |
- Major agreements for cooperation between MMC and Volvo's truck and bus operations.
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(1) |
Feasibility study of the joint development and supply of cabs, engines and transmissions for the next generation medium-duty trucks. |
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(2) |
Information exchange regarding future technology. |
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(3) |
Regional cooperation in South America, Australia and New Zealand. |
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(4) |
Expansion of sales of MMC light-duty trucks by Volvo in Europe. |
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