With Renault Out, Volvo Has More Freedom to Restructure image

As Renault sod its stake in Volvo, it offered the Swedish automaker more freedom to solve its problems in Europe.

In 1993 Renault came close to an outright merger with Volvo, holding a stake in the business since 2001, when the French company sold its trucks division to the Swedish truck maker in exchange for shares. But as the European market is on its way to reach a 20-year low, Renault was forced to sell these shares to avoid cutting jobs and closing plants. The 1.48 billion euro ($1.93 billion) from this sale will be used to fund its domestic and international investments, but also to cut its automotive net debt which reached 818 million euro by June 30th.

Renault’s selling of shares left Swedish investment group Industrivarden the major shareholder in Volvo, as the company also bought 10 million of the shares sold by the French company. Now Industrivarden holds 18.7% stake in Volvo. Renault’s giving up its stake in the Swedish automaker also means that the French government has less power in interfering with Volvo’s efforts to deal with the deep slump in Europe, which is its biggest market.

“Given Volvo’s leadership position and proven ability, combined with increasing global transportation needs and growing environmental concerns, we see good potential for value creation in our investment,” Industrivarden President Anders Nyren said.