Unpacking the deal
In January 2020, the trucking world was rocked by the news that Isuzu was planning to acquire UD. There were a number of regulatory hoops that the parties involved in the transaction – the Volvo Group and Isuzu Motors – had to jump through. This has now happened, and Isuzu purchased UD for an eye-watering JPY 243 billion (approximately R32 billion) on a cash and debt-free basis. Not surprisingly, we received the announcement that the transaction is estimated to have a positive impact on the Volvo Group’s operating income in the second quarter of 2021 of close to SEK 2 billion (around R3.4 billion).
Volvo furthermore announced that it would be forming a 20-year alliance with Isuzu Motors, which is “set to a build long-term and robust relationship”. The Volvo Group and Isuzu Motors will establish a Joint Alliance Office, with facilities both in Japan and Sweden, which will be overseen by an Alliance Board comprising the Isuzu Motors President, the Volvo Group CEO and other key executives from the two groups.
Stronger business for UD and Isuzu on the cards
The two companies intend forming a technology partnership, intended to leverage the parties’ complementary areas of expertise within both well-known and new technologies. Furthermore, they intend “creating the best long-term conditions for a stronger heavy-duty truck business for UD Trucks and Isuzu Motors in Japan and across international markets by transferring ownership of the complete UD Trucks business from the Volvo Group to Isuzu Motors”.
The alliance will also explore “further opportunities for even broader and deeper collaboration within the commercial vehicle businesses across geographical areas and product lines for future urban logistics solutions”. And the partners will explore “cooperation in the areas of purchasing and logistics, leveraging common technology, as well as the geographical footprint complementarity and volume expansion”.
What of SA?
This is all very well. But what will be the impact on South Africa – and specifically on local transport operators?
In order to answer this question, we approached Isuzu Motors South Africa as well as UD Trucks Southern Africa and UD Trucks Japan. Mongezi Elvis Hermans, senior vice president: human capital & corporate affairs at Isuzu Motors South Africa, confirmed that “Isuzu Motors of Japan recently announced that the Volvo Group and Isuzu Motors have signed binding agreements to form a strategic alliance, focused on capturing opportunities in the commercial vehicle segment of the automotive industry”.
However, he declined to comment further. “We are unable at this stage to comment on how this will impact upon our operations in South Africa as all the details first need to be determined by both companies at a corporate level. As soon as we have more information we will share this with you,” he promised.
Kurihashi Etsuko, director of external communications at UD Trucks Japan, had more precise feedback for us. One of the concerns on behalf of operators is that competing truck products could be eliminated from the companies’ product line-ups. She denied that this would happen. “There is no such a plan at this moment. We have our own product line-ups that are designed to develop to respond to the needs of each market,” she said.
Both brands to remain
There have also been fears that one of the brands could disappear – but she says that this won’t happen either. “Both brands will remain. Each brand has its own strength and customer base,” she explained.
What about dealerships? Will both dealer networks remain in place in South Africa? The answer to this question is yes. “We just started to discuss the synergy of the alliance in the whole value chain from sourcing, technology to production and sales,” Etsuko told us.
Practically, one wonders about the day-to-day effect on South African truck operators – but Etsuko says this isn’t an issue. “The alliance is not something that affects our business with our customers. We will continue to take care of our customers by going the Extra Mile as the UD brand as we have always done,” she stressed.
Finally, she was upbeat about the acquisition and the implications for South African truck operators. “We are committed to a ‘Better Life’ for people and the planet by delivering sustainable logistics solutions. In the strategic alliance between Isuzu Motors and the Volvo Group, UD Trucks plays a huge role in making it successful. We will get bigger, better and stronger, together with Isuzu – to the benefit of logistics and the planet,” Etsuko concludes.
It certainly sounds as though the acquisition is good news on all fronts. We will watch developments in this regard with great interest.
