Volvo and Mitsubishi Motors sign strategic alliance agreement

12/13/1999 3:33 AM EST

VOLVO AND MITSUBISHI MOTORS SIGN STRATEGIC ALLIANCE AGREEMENT

Volvo and Mitsubishi Motors Corporation have signed a final agreement
covering the establishment of a strategic alliance between the companies
in accordance with the letter of intent publicized in October this year.
In accordance with the original agreement, Volvo has now also acquired
48,516,000 newly issued shares, corresponding to 5 percent of the votes
and capital in Mitsubishi Motors for JPY 29 billion (SEK 2.3 billion).

The agreement disclosed earlier this year between Volvo and Mitsubishi
Motors contained an accord covering ownership cooperation and a letter of
intent to form a strategic alliance between the companies covering market,
product and industrial cooperation in the truck and bus segments.
Volvo and Mitsubishi have now signed a final agreement governing the form
and the areas for the cooperation. The agreement covers the following
areas:

1. Mitsubishi Motors forms a new truck and bus subsidiary in which Volvo
will hold an ownership interest.

* as a first step toward forming this subsidiary, Mitsubishi will
establish an internal division for its truck and bus operations not later
than April 2000.

* in a second step, not later than year-end 2001, Mitsubishi will have
formed a subsidiary that will include Mitsubishi´s total operations for
development, production and marketing of trucks and buses.

* Volvo acquires 19.9 percent of the shares in this subsidiary.

2. Establishment of the decision-making structures for the cooperation.

3. Cooperation agreement between Volvo and Mitsubishi in trucks and buses
regarding:

* joint development of the next generation of medium-duty trucks, and
purchasing of components for these products.

* exchange of information about future technologies and sharing of heavy
duty components.

* regional cooperation in Asia, South America, Australia and New Zealand.

* increased sales of Mitsubishi´s light trucks through Volvo´s
distribution network in Europe.

"The cooperation with Mitsubishi very significantly strengthens Volvo´s
position in the Asian truck and bus markets which, long term, have a
considerable growth potential. Mitsubishi´s strong presence in the region
and its competitive volumes, particularly in light and medium-weight
vehicles offers many attractive prospects," says Karl-Erling Trogen,
President of Volvo Truck Corporation.
Mitsubishi Motors´ truck and bus sales represent about 25 percent of
Mitsubishi Motors´ total operations. Cars account mostly for the remainder
of sales. Mitsubishi Motors´ total market capitalization is currently SEK
30 billion. The final price that Volvo will pay for its 19.9 percent
interest in the future truck and bus company depends on capitalization and
expected earnings performance in this company. Volvo and Mitsubishi are in
agreement regarding the principles for these calculations.

"As a result of the signed agreement, we now have a framework and a
platform for how continued cooperation between Volvo and Mitsubishi will
be carried out. Our joint discussions have already generated so many ideas
and proposals for specific projects that, in my opinion, the cooperation
with Mitsubishi could show greater potential than the original
assessments," says Volvo´s CEO Leif Johansson.

December 13, 1999