The Volvo Grooup has signed a letter of intent with the Indian vehicle manufacturer Eicher Motors Limited regarding the establishment of a new Indian joint-venture company. According to the letter of intent, the joint-venture company will hold eicher Motors limiteds entire truck and bus operations and the Volvo Groups Indian sales operations within trucks. Motorcycle production will provide US $ 350 million to the joint-venture company through transferring its Indian truck dealer and service network to the company, valued at Us $ 75 million, and contributing Us $ 275 million in cash. The cash contribution means that the joint-venture company gains highly favourable financial resources to be able to initiate an aggressive focus on the heavy segment.
As a result of the transaction. Vovo receives a direct ownership in the joint-venture company of 45.6 per cent. Since Volo also intends to acquire 8.1 per cent of Eicher Motors from the majority owner, Volvo gains an ownership interest, directly and indirectly, of 50 per cent of the joint-venture company. The joint-venture company will have its production mainly concentrated to Eicher Motors current plant in Pithampur near Indore. The joint-venture company will have about 2.300 employees and the operations within the joint-venture company that come from Eicher Motors had sales in 2006 of about SEK 3.0 billion and operating income of SEK 128 million. The operating margin for the period was 4.2 percent.
The parties intent is to immediately combine and establish a joint service and dealer network for trucks in India, while initiating joint projects within product development and purchasing. "Eicher is an ideal partner for Volvo on the Indian market. "says Volvo Deputy CEO Jorma Halonen, who is responsible for the Groups expansion in Asia.
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| Posted : 2/27/2008 |
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