STRATEGIC ALLIANCE BETWEEN VOLVO & RENAULT

THE STRATEGIC ALLIANCE BETWEEN VOLVO AND RENAULT

Volvo AB of Sweden has had a strategic alliance in effect with Renault of France since 1990 (Ozaroff, 1993, p. 112). At some point in 1994, this strategic alliance is scheduled to end when the two international firms are merged into a single firm. When all of the dust surrounding the merger settles, Volvo will be the largest shareholder in the new Renault-Volvo Company, with a 35 percent ownership share (Ozaroff, 1993, p. 112). While the government of France will initially own a 65 percent share of the new firm as a consequence of its ownership of Renault, a condition of the merger agreement is that France must privatize Renault, leaving Volvo as the largest single shareholder in the new firm (Ozaroff, 1993, p. 112).

This research examines the strategic alliance between Volvo and Renault that became effective in 1990 and that will remain in effect until some point in 1994. This examination focuses on Volvo AB as the multinational corporation with a strategic alliance with a company in a second country. Renault of France is the alliance partner.

Volvo is a major worldwide automobile manufacturer, and it is Sweden's largest company (Ozaroff, 1993, p. 112). Sweden is a Scandinavian country with a population approximating 8.5 million (Hunter, 1993, p. 1141). As an industrialized country, Sweden is second behind Switzerland with resp

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t (a part of the 38.2 percent foreign ownership in the company) in Volvo (Ozaroff, 1993, p. 112) Volvo's automobiles compete generally in the luxury class. Thus, its competitors in Europe include, among others, Mercedes- Benz, BMW, and Jaguar. In North America, General Motors, Ford, and Chrysler manufacture competing models. In Japan, both Nissan and Toyota manufacture competing models. Volvo's trucks and buses compete with models produced in Western Europe, Japan, and North America. Volvo competes in the worldwide automobile industry. The great majority of the company's sales, however, are in Western Europe and North America. The financial position of Volvo AB is considered primarily within the context of ratio analysis. Additionally, abbreviated balance sheets and income statements for the 1990-1992 period are included in the consideration of the company's financial position. Selected ratios are presented with respect to liquidity, leverage, activity, and profitability. Liquidity is measured in the contexts of both the current ratio and the quick ratio. These ratios for the 1990-1992 period are presented in Table 1, which may be found below on this page. Each of the liquidity ratios were stable ove

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