Renault Sells Its Volvo Shares

Various reports have already suggested that Renault is losing sales faster if compared to any of the other European carmakers. It seems that the carmaker is trying to boost its funding currently as it has sold its remaining stakes in Swedish truck maker company Volvo AB. This sale is expected to fetch around $1.92 billion for Renault and will end its run of 11 years as the largest owner of Volvo AB. Incidentally, in 2010; Renault sold 14.9% of its Volvo stake.

A total of 6.5% holding was disposed of by Renault at a price of 92.25 kronor per share. This is 3.8% lower than yesterday’s closing price for Volvo AB’s shares that of 95.90 kronor per share. Renault expects to reduce its current debt through this funding and will also invest in countries such as China, France and Russia, as confirmed in an official statement by the Renault officials. These new investments will allow the company to strengthen its position in the competitive market, follow the rejuvenation program and foster the international expansion, as mentioned in the official statement.

Incidentally, the European car manufacturing industry on a whole is seeing tough times, probably the biggest drop in last 19 years. PSA Peugeot Citroen has already asked for a loan worth 7 billion Euros from the French Government to survive properly. Other companies such as Fiat SpA, Ford Motor Co and General Motors Co have also taken measurements that allow them to save up funds. Renault, the renowned French carmaker is the latest entry to this list and the company policymakers probably saw it coming after a share price plunge of 18% throughout the month of October.

According to the analyst of Commerzbank AG, Sascha Gommel, this sale will give Renault the required cash which they can use for investment purpose and as they will be putting the money in new models and technologies, Renault can expect good growth in future. Even investors thought alike Sascha, as the shares of Renault rose by 1.5% and are currently priced at 40.22 euros per share.

On the other hand, Volvo shares plummeted by 4.3%. The company has seen a total growth of 21% in 2012 and the each of its shares is priced at 91.75 kronor currently. Marten Wikforss, the spokesperson of Volvo, declined to make any comment on Renault’s decision to sell the shares.