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Volvo halts Iran truck assembly due to U.S. sanctions

Stock MarketsSep 24, 2018 08:16AM ET
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© Reuters. FILE PHOTO - IAA truck show in Hanover

By Esha Vaish

STOCKHOLM (Reuters) - Swedish truckmaker AB Volvo has stopped assembling trucks in Iran because U.S. sanctions are preventing it from being paid, a spokesman for the company said on Monday.

The sanctions against Iran, reimposed on Aug. 6 by U.S. President Donald Trump after his decision to pull out of a nuclear deal with Tehran, have forced companies across Europe to reconsider their investments there.

Volvo spokesman Fredrik Ivarsson said the trucks group could no longer get paid for any parts it shipped and had therefore decided not to operate in Iran in another blow to the country's car industry, which unlike the energy and banking sectors, had managed to sign contracts with top European firms.

"With all these sanctions and everything that the United States put (in place) ... the bank system doesn't work in Iran. We can't get paid ... So for now we don't have any business (in Iran)," Ivarsson told Reuters by telephone.

Before the sanctions were reimposed, Volvo had expressed an ambition for Iran to become its main export hub for the Gulf region and North Africa markets.

The European Union has implemented a law to shield its companies, but the sanctions have deterred banks from doing business with Iranian firms as Washington can cut any that facilitate such transactions off from the U.S. financial system.

TRUCK EXIT

Volvo was working with Saipa Diesel, part of Iran's second-largest automaker SAIPA, which was assembling the Swedish firm's heavy-duty trucks from kits shipped to Iran.

Ivarsson said Volvo had no active orders in Iran as of Monday.

A commercial department manager at Saipa Diesel confirmed that sanctions had prompted Volvo Trucks to terminate their partnership agreement.

"They have decided that due to the sanction on Iran, from (May) they couldn't cooperate with us. We had some renovation planned in Iran for a new plant but they refused to work with us," said the manager, who declined to be identified.

More than 3,500 Volvo trucks had been assembled by Saipa Diesel in the year to May, but none had been assembled in this financial year although the original deal was for at least 5,000 trucks, the manager told Reuters.

Swedish truckmaker Scania, which is owned by Volkswagen (DE:VOWG_p), said it had canceled all orders that it could not deliver by mid-August due to sanctions, while French carmaker PSA Group began to suspend its joint venture activities in Iran in June.

Germany's Daimler has said it is closely monitoring any further developments, while carmaker Volkswagen has rejected a report that suggested it had decided against doing business in Iran.

Volvo halts Iran truck assembly due to U.S. sanctions
 

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