20-year binding agreement includes UD transfer and future development
Volvo Group and Isuzu Motors have offered further detail on the commercial vehicle strategic alliance recently finalised by both parties.
The deal cements the memorandum of understanding signed in December 2019 “to capture the opportunities in the ongoing industry transformation”.
Isuzu will pay JPY 243 billion (A$3.3 billion), subject to regulatory approval, to buy subsidiary UD Trucks from Volvo to “create the best long-term conditions for a stronger heavy-duty truck business for UD Trucks and Isuzu Motors in Japan and across international markets”.
Other aspects of the alliance include:
- Forming a technology partnership to leverage the parties’ complementary areas of expertise, including joint development by Isuzu and UD of common platforms for medium heavy-duty truck models for the Japanese- and other Asian markets, utilising, amongst others, Volvo Group technology
- Intended cooperation regarding new technologies such as autonomous driving, connectivity and medium- and heavy-duty electrical vehicles
- Exploring further opportunities for even broader and deeper collaboration within the commercial vehicle businesses across geographical areas and product lines for future urban logistics solutions.
- Exploring cooperation in the areas of purchasing and logistics, leveraging common technology, as well as the geographical footprint complementarity and volume expansion.
Further, Isuzu and UD are “discussing the conditions for the supply of certain truck variants” from UD to Isuzu from 2022 onwards.
For seamless business continuation in the meantime, Volvo will provide transitional services and supply components to UD.
Volvo and Isuzu will establish a joint alliance office, with facilities both in Japan and Sweden, which will be overseen by an alliance board comprising the Isuzu president, Volvo CEO and other key executives from both companies.
The alliance framework agreement is signed for a minimum 20 years.
How news broke of the Isuzu and Volvo MOU last year, here
“I have high expectations on this strategic alliance, which will make Volvo and Isuzu Motors even more competitive within their respective markets and segments,” Volvo Group CEO Martin Lundstedt says.
“This is an opportunity to share technology investments and also to help each other grow.
“I am confident that UD Trucks will become a bridge between the Volvo Group and Isuzu Motors and that the strategic alliance will create the conditions to continue to develop UD Trucks to a new level within Isuzu Motors.
“I also want to express my pride at how the UD Trucks team has been able to serve customers and continue to improve financial performance also during this unprecedented period, characterized by the COVID-19 pandemic.
“The Volvo Group will continue to support UD Trucks, and participate in the Asian markets through this alliance.”
The agreement on UD includes an earnout, with an additional JPY 15 billion (A$200,000) to be paid subject to the company’s financial performance between 2021-2023.
UD’s revenue for the last 12 months to June 2020 was JPY 278 billion (A$3.8 billion) and is said to have had a “marginally positive” impact on Volvo Group’s operating income.
“This is a very exciting day. We have signed the strategic alliance agreement with the Volvo Group,” Isuzu Motors Limited president Masanori Katayama says.
“The difficult and unforeseeable COVID-19 situation has made the strategic alliance even more valuable and has built a solid, trustful relationship between Isuzu and the Volvo Group.
“This long-term partnership will span across products, technologies and regions, and actively contribute to service improvements and strengthened customer satisfaction as well as supporting the logistics industry.
“I am fortunate to have UD Trucks joining the Isuzu Group. UD Trucks will play an important role of the strategic alliance for efficient and effective collaboration between Isuzu Motors and the Volvo Group.”