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VW, Volvo shares rise on report of talks
FRANKFURT, Germany - Shares of Volkswagen and Volvo jumped
Wednesday in European trading after a newspaper report said the two
carmakers were discussing an alliance that could eventually lead to a
The Wall Street Journal quoted unidentified sources in Wednesday's
editions as saying the two companies were in preliminary talks on a
business alliance that could eventually lead to a merger.
The newspaper said Volkswagen is looking for a partner that could
help it enter the market for medium and heavy trucks. Volvo is one of
the world leaders in that area.
Germany's Volkswagen is Europe's largest carmaker, while Sweden's
Volvo is a leader in making trucks.
Auto industry watchers said a deal would be the right strategic move in
light of German carmaker Daimler-Benz's May agreement to buy
Volvo confirmed that its chief, Leif Johansson, met with Volkswagen
chairman Ferdinand Piech last Friday in Goteborg, Sweden, but
refused to comment further.
A spokeswoman for Volvo Germany in Cologne, though, sought to
play down the significance of the meeting, calling it "completely normal."
She said the two men talked about the delivery of engines and other
components, adding that such conversations take place all the time.
Spokesmen for Volkswagen, based in Wolfsburg, had no immediate
In Wednesday trading, Volkswagen shares were up 4.2% in Frankfurt
while Volvo shares were up 5.5% in Sweden.
Currently, Volkswagen's commercial-vehicle division specializes in light
vans and minibuses.
Price might be a sticking point. In a takeover, VW would presumably
have to pay cash or shares that represent a premium over Volvo's
current market value of about 23.5 billion marks ($13 billion), analysts
German companies seeking to stay competitive in the global market
have been increasingly aggressive about seeking partners abroad.
Within the past two months, Volkswagen announced it intends to buy
two luxury automakers - Rolls-Royce Motor Cars of Britain and Italy's
Lamborghini. Daimler-Benz shook the auto world with its agreement in
May to buy the third biggest U.S. carmaker Chrysler for $33 billion in
European chemical and media companies have also gone on foreign
shopping sprees in recent years
Bertelsmann, for example, is adding the biggest U.S. book publisher,
Random House, to its stable of print and music companies. Siemens is
buying Westinghouse Electric's non-nuclear power generation business
and Deutsche Telekom has a 10% stake in Sprint.