Mergers: Cranking Up the Carousel

Sweden is hardly known for its temperate climate at this time of year. But it’s been a hotbed of rumors ever since Volvo AB decided to sell its car division to Ford Motor Co. for a cool $6.45-billion US and expand its truck business. Volvo’s first move after the Ford deal was to buy 13% of Swedish rival Scania in January, with the intent of acquiring the rest.

Its second? The company is rumored to be talking with Chicago-based Navistar International Corp. about a possible takeover, which would marry the world’s second- and fourth-largest truck OEMs, respectively.

Like most truck builders in North America, Navistar has been riding high of late. It reported fiscal first-quarter earnings (ended Jan. 31) that rose a higher-than-expected 61%, and doubled its profit per share over the previous year.

Meanwhile, Volvo’s North American group is pumping out VN tractors at a record pace.

The company got a boost in January when workers at its New River Valley assembly facility in Dublin, Va., ratified a six-year labor contract, seen as the first step toward a $148-million plant expansion that would increase output there to 50,000 trucks a year. “First and foremost, this promises to be a good deal for truck buyers,” says Marc Gustafson, president of Volvo Trucks.

“They’re keeping us busy.”

And that second step? The promise of a slew of economic benefits from state and local governments.