Volvo's Hopes Hang on Strategic Alliance

04/04/96

Reuters reported that Swedish carmaker Volvo is on the verge of announcing a strategic alliance with other carmakers, and that Volvo needs that alliance to survive. Speculation among industry analysts pairs Volvo with Chrysler and Mitsubishi, although both Volvo and Chrysler have denied that they are considering any such alliance.

Automotive industry analysts consider Volvo's truck division to be healthy, but they say that Volvo's car business is too small to compete in a fierce global market. Volvo attempted to arrange a merger with France's Renault, but those plans fell apart.

Speculation about a Volvo Chrysler and Mitsubishi alliance arises because Volvo already has a cooperative relationship with Mitsubishi and because Chrysler is intent on establishing a stronger foothold in the European market. Analysts point out that an alliance between the three automakers would give all three a stronger presence all over the world than any of them has individually. Chrysler's Voyager minivan has splashed big in Europe, but the company has had trouble following up on that success because they are without a broad dealer network overseas. An analyst remarked that its cheaper to buy market share than to build it.

Paul Dever -- The Auto Channel