Volvo and Mitsubishi Motors sign strategic alliance agreement

VOLVO AND MITSUBISHI MOTORS SIGN STRATEGIC ALLIANCE AGREEMENT Volvo and Mitsubishi Motors Corporation have signed a final agreement covering the establishment of a strategic alliance between the companies in accordance with the letter of intent publicized in October this year. In accordance with the original agreement, Volvo has now also acquired 48,516,000 newly issued shares, corresponding to 5 percent of the votes and capital in Mitsubishi Motors for JPY 29 billion (SEK 2.3 billion). The agreement disclosed earlier this year between Volvo and Mitsubishi Motors contained an accord covering ownership cooperation and a letter of intent to form a strategic alliance between the companies covering market, product and industrial cooperation in the truck and bus segments. Volvo and Mitsubishi have now signed a final agreement governing the form and the areas for the cooperation. The agreement covers the following areas: 1. Mitsubishi Motors forms a new truck and bus subsidiary in which Volvo will hold an ownership interest. * as a first step toward forming this subsidiary, Mitsubishi will establish an internal division for its truck and bus operations not later than April 2000. * in a second step, not later than year-end 2001, Mitsubishi will have formed a subsidiary that will include Mitsubishi´s total operations for development, production and marketing of trucks and buses. * Volvo acquires 19.9 percent of the shares in this subsidiary. 2. Establishment of the decision-making structures for the cooperation. 3. Cooperation agreement between Volvo and Mitsubishi in trucks and buses regarding: * joint development of the next generation of medium-duty trucks, and purchasing of components for these products. * exchange of information about future technologies and sharing of heavy duty components. * regional cooperation in Asia, South America, Australia and New Zealand. * increased sales of Mitsubishi´s light trucks through Volvo´s distribution network in Europe. "The cooperation with Mitsubishi very significantly strengthens Volvo´s position in the Asian truck and bus markets which, long term, have a considerable growth potential. Mitsubishi´s strong presence in the region and its competitive volumes, particularly in light and medium-weight vehicles offers many attractive prospects," says Karl-Erling Trogen, President of Volvo Truck Corporation. Mitsubishi Motors´ truck and bus sales represent about 25 percent of Mitsubishi Motors´ total operations. Cars account mostly for the remainder of sales. Mitsubishi Motors´ total market capitalization is currently SEK 30 billion. The final price that Volvo will pay for its 19.9 percent interest in the future truck and bus company depends on capitalization and expected earnings performance in this company. Volvo and Mitsubishi are in agreement regarding the principles for these calculations. "As a result of the signed agreement, we now have a framework and a platform for how continued cooperation between Volvo and Mitsubishi will be carried out. Our joint discussions have already generated so many ideas and proposals for specific projects that, in my opinion, the cooperation with Mitsubishi could show greater potential than the original assessments," says Volvo´s CEO Leif Johansson. December 13, 1999 ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/1999/12/13/19991213BIT00130/bit0001.doc http://www.bit.se/bitonline/1999/12/13/19991213BIT00130/bit0002.pdf