Renault–Volvo Strategic Alliance (a): March 1993

13 Pages Posted: 21 Oct 2008

See all articles by Robert F. Bruner

Robert F. Bruner

University of Virginia - Darden School of Business

Robert E. Spekman

University of Virginia - Darden School of Business

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Abstract

Set in 1993, this series of cases (A, B, C, D, and B [Abridged]) concerns the strategic alliance between the automotive businesses of AB Volvo, the largest industrial group in Scandinavia, and Renault S.A., the largest enterprise in France. This alliance was one of the most prominent failures of multinational business integration seen in recent years. The aim of this series is to explore three broad themes: strategic alliances, leadership of corporate transformation, and governance and investor relations. The A case reviews the original formation of the strategic alliance in 1990 and its status as of March 1993, when the probability of Renault's privatization increased. The tasks for the student in the A case are to assess the origins and current health of the strategic alliance and to recommend responses to the impending privatization of Renault.

Excerpt

UVA-G-0480

Rev. Mar. 9, 2011

RENAULT–VOLVO STRATEGIC ALLIANCE (A): MARCH 1993

In March 1993, the French elections turned the privatization of Régie Nationale des Usines Renault (Renault) from a hypothetical possibility into a likelihood. Louis Schweitzer, Renault's CEO, regarded that exciting development as a challenge and an opportunity. The French government had a legacy of being fairly interventionist—would it give up control in Renault in one transaction or, instead, would it choose to relinquish control more slowly? More importantly, how would the privatization of Renault affect the strategic alliance between Renault and the Swedish AB Volvo—an alliance that had been in force since 1991?

The alliance had been based on the exchange of shares, the formation of an elaborate structure of coordinating committees, and the initiation of several strategic projects, including a jointly designed executive car targeted for sale by the year 2000. The long-run vision had been that the strategic alliance might one day culminate in a merger of the two automotive manufacturers. Whether the firms should combine would depend importantly on considerations of timing, the health of the strategic alliance, a careful assessment of the benefits to be gained, and the lessons Volvo and Renault had learned through the alliance thus far. Volvo and Renault had discussed the possibility of merger for years—as recently as 1992. Should the two firms aim to consummate a merger before privatization or after?

Similar questions preoccupied Pehr Gyllenhammar, Volvo's CEO. The answers, however, seemed less problematic. As a small automobile manufacturer, Volvo would find it increasingly difficult to keep pace with the new model development and manufacturing initiatives of its competitors. Indeed, 1992 had been a disastrous year for Volvo's financial performance and lent strength to the industrial logic of combining with another automotive manufacturer. It seemed to Gyllenhammar that the alliance with Renault was working well. While the Swedes might be reluctant to dilute their control over Scandinavia's largest industrial group, Gyllenhammar had argued for years that fuller integration of Sweden—and Volvo—into the European community was the best path to national prosperity. The strategic alliance with Renault embodied that vision.

. . .

Keywords: acquisitions, joint ventures, leadership corporate financial strategy

Suggested Citation

Bruner, Robert F. and Spekman, Robert E., Renault–Volvo Strategic Alliance (a): March 1993. Darden Case No. UVA-G-0480, Available at SSRN: https://ssrn.com/abstract=909930

Robert F. Bruner (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-3823 (Phone)
434-924-0714 (Fax)

HOME PAGE: http://faculty.darden.edu/brunerb/

Robert E. Spekman

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4860 (Phone)

HOME PAGE: http://www.darden.virginia.edu/faculty/spekman.htm

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