Volvo AB (NASDAQ: VLVLY) is selling its UD Trucks unit in Japan to Isuzu Motors Ltd. with the two companies planning to partner on new technologies like electrification and autonomous trucking.
A nonbinding memorandum of understanding is expected to be replaced by contracts covering specific technologies that will strengthen the combined Isuzu and UD Trucks businesses in Japan and other markets, the companies said in a joint statement Dec. 18.
Isuzu is paying Volvo Group $2.28 billion for the UD Trucks unit. The deal is subject to regulatory approvals and is expected to close by the end of 2020. Volvo expects to realize a $212 million operating gain from the sale and boost its net cash position by $2.3 billion.
Sweden’s Volvo Group is the world’s fifth-largest truck-making group. Its brands include Volvo, France’s Renault Trucks and Mack Trucks. UD Trucks’ annual sales of $2.5 billion had a minimal impact on Volvo Group’s $41.5 billion annual revenue.
“The Volvo Group and Isuzu Motors have a well-established relationship on medium-duty trucks in Japan,” said Martin Lundstedt, Volvo Group CEO and president. “We see great potential to extend our cooperation within technology, sales and service as well as other areas going forward.”
The intended strategic alliance includes:
- Forming a partnership to leverage complementary areas of expertise within both well-known and new technologies while driving larger volume to support technology investments.
- Improving best long-term conditions for a stronger heavy-duty truck business for UD Trucks and Isuzu Motors in Japan and across international markets.
- Deepening collaboration within the commercial vehicle business across geographical areas and products, such as light- and medium-duty trucks.
“We intend to derive the full value from each other’s different specialties across product and geographical strongholds,” said Masanori Katayama, Isuzu Motors president and representative director.
UD Trucks in August demonstrated a Level 4 fully autonomous truck operating at a sugar plantation in Hokkaido Prefecture in northern Japan.