In order to ensure better cash flow in 2010, Renault Motors France will sell its own ownership of Volvo Trucks.
A financial statement just released shows that in the first quarter of this year, Renault Motors’ company’s revenue reached 9.07 billion euros, which is a substantial increase from 7.07 billion euros under the severe impact of the same period last year. It also exceeds the expectations of Renault Motor Co., which was originally expected to reach 8.8 billion euros in the first quarter of 2010.
In the first three months of this year, Renault Motors' automobile sales revenue reached 8.64 billion euros, an increase of 30.3% over the same period of last year. This is mainly due to the “old-for-new†subsidy policy implemented by European governments.
However, it is worrying that once these policies are over, the future of the European auto market may become unclear. The development of the German auto market in recent months is enough to illustrate this point.
Therefore, Renault Motors of France is more pessimistic about the development of the European auto market this year and believes that this year's auto market in Europe may shrink by 10%.
In this context, having sufficient cash flow will be crucial.
Thierry Meronkai, Renault’s CFO, stated: “The sale of shares will play a role in this process. Good performance in the first quarter has led us to hope to finally change the Volvo truck stock price...â€
Earlier, Renault Motors announced on more than one occasion that its 20.7% ownership of Volvo Trucks is not a strategic investment.
As early as the beginning of this year, Renault’s chief executive Carlos Ghosn also pointed out that he will consider stripping some assets, but he will not be forced to sell any assets at a low price. He also said that he will not be forced to sell his stake in Volvo in order to further reduce debt.
Volvo Trucks made a profit in the first quarter of this year after the cost of internal submersibles was reduced and the capacity was increased. From the net loss of 4.2 billion SEK in the same period of last year to a net profit of SEK 1.7 billion (approximately 255 million U.S. dollars).
After publishing Volvo Truck's unexpectedly good performance report in the first quarter of this year, Renault's share price has risen significantly. Rumors concerning the sale of shares of Volvo Trucks by Renault Motors in France have mobilized the enthusiasm of investors.
The definite statement made by the leadership of Renault Automotive further proves that Renault considers it possible to sell its stake in Volvo Trucks.
There are even reports that Renault Motors has hired professionals from Lazard Investment Bank, BNP Paribas and Credit Suisse Group to prepare for the smooth sale of its stake in Volvo Trucks.
The steady development of the world truck market has led many potential buyers to become more interested in acquiring shares in Volvo Trucks from Renault. Renault Motors is waiting for the best time to sell its stake in Volvo Trucks at a good price. It is estimated that Renault Motors owns 20.7% of Volvo Trucks, which currently has a market value of approximately 3.5 billion pounds.
Today, Volvo Trucks is the second largest truck manufacturer in the world. Therefore, the equity transaction may involve anti-monopoly issues in the EU.
The CEO of Volvo Trucks once stated in March this year that "as a result of antitrust issues, it is unlikely that other truck manufacturers will come to purchase shares in Volvo Trucks held by Renault Motors. And more likely, Investors from the financial sector will acquire this portion of Volvo Trucks."
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