Renault Sells its Shares in Volvo

Saturday 09 October 2010, 00:00 AM by Payal Pathak

French auto maker Renault has sold its shares in Swedish car firm Volvo making its shares soar in the international market . The company is in a hurry to reduce its financial debt, and Renault Chairman and Chief Executive Carlos Ghosn said in July that Renault will resume paying a dividend only when it can show positive free cash flow. As a result, it has reduced its debt to €3 billion from €5.9 billion, and it had also skipped a dividend payout in 2009 and will do so again this year.

Renault SA, France’s second-largest carmaker, sold a 14.9 percent stake in Volvo AB for 3 billion euros ($4.2 billion), taking advantage of a surge in the Swedish truckmaker’s shares to pay down debt. “It was a necessary step and a defensive move,” Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler who recommends selling Renault’s stock. “The motivation is clear: they need cash for the normal business but it’s also not an exit from the truck business or from Volvo. It’s a compromise.”

France's second-largest car maker after PSA Peugeot-Citroen is holding on to its class-A shares in Volvo, which represent 6.8% of Volvo's capital and 17.5% of its voting rights.

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