A non-binding Memorandum of Understanding between Volvo Group and Isuzu Motors has been signed to pave the way towards Isuzu taking over UD Trucks. According to a statement released the idea is ‘to form a strategic alliance within commercial vehicles in order to capture the opportunities in the ongoing transformation of the industry’.
The first step will be to combine the heavy-duty truck businesses of Isuzu Motors and UD Trucks in Japan and across international markets. This will entail transferring ownership of the complete UD Trucks business globally from the Volvo Group to Isuzu Motors.
According to Volvo this move should ‘accelerate growth by leveraging greater volumes and complementary capabilities’. There is great complementarity between the two Groups from both a geographical and product line perspective, with further opportunities to be explored over time.
Behind the deal is a a mutual need to prepare for the future technology in the truck industry. For the Volvo Group, the UD brand has always been very much the baby brother to the other two brands, Volvo and Mack, in the business.
For Isuzu, as a stand alone truck manufacturer in a world dominated by the larger global groupings, it is an opportunity to tap into the latest technological developments. Volvo’s global electronic architecture will have the effect of bringing the Japanese truck makers onto equal terms with its close competitors Fuso and Hino, which are already part of global corporations and have access to the results of massive research and development budgets.
The enterprise value for the complete UD Trucks business is $3.3 billion (250 billion Japanese Yen as per the end of November 2019) and will be subject to the final scope of the business transferred and Isuzu Motor’s due diligence.
According to Volvo, the transaction is expected to result in a positive impact on the Volvo Group’s operating income of approximately $310 million and increase the Volvo Group’s net cash position by approximately $3.4 billion.
“The Volvo Group and Isuzu Motors have a well-established relationship on medium-duty trucks in Japan based on mutual respect, shared values and win-win spirit,” said Martin Lundstedt, President and CEO of the Volvo Group. “We see great potential to extend our cooperation within technology, sales and service as well as other areas going forward, for the benefit of our customers and business partners.
“Our UD Trucks colleagues have done a great job to improve performance in recent years and the alliance opens up a great opportunity to continue the successful journey.”
As well as Isuzu taking over UD Trucks, the intended strategic alliance between the Volvo Group and Isuzu Motors will include:
- Forming a technology partnership, leveraging the parties’ complementary areas of expertise within both well-known and new technologies as well as to create a larger volume base to support necessary, forthcoming technology investments.
- Creating the best long-term conditions for a stronger heavy-duty truck business for UD Trucks and Isuzu Motors in Japan and across international markets.
- Exploring opportunities for even broader and deeper collaboration within the commercial vehicle business across geographical areas and product lines, such as light- and medium-duty trucks.
“Isuzu Motors and the Volvo Group strongly believe in the business opportunities and synergy potential between the two Groups,” said Masanori Katayama, President and Representative Director of Isuzu Motors. “We intend to derive the full value from each other’s different specialties across product and geographical strongholds. Our collaboration will actively contribute to service improvements and strengthened customer satisfaction as well as to prepare ourselves for the forthcoming logistics revolution.”