Volvo buys into Chinese truck maker

SWEDISH heavy-vehicle maker Volvo plans to buy 45 per cent in a new subsidiary of Chinese vehicle maker Dongfeng Motor Group Company, making it the world's largest producer of heavy-duty trucks.

"With this deal we have also secured a very strong foothold in the Chinese market," Olof Persson, Volvo Group chief executive, told Swedish Radio news from Beijing.

Mr Persson noted that China was the world's largest truck market, equivalent to the European and North American markets combined.

The transaction with Dongfeng was worth about 6 billion kronor ($891 million), the Volvo Group said.

It was estimated the deal would take 12 months to complete, subject to approval from anti-trust agencies and Chinese authorities.

The move is part of Volvo's plans to expand in Asia. The groups plan to co-operate on engines and power-train components, and product platforms and purchasing, Volvo said.

The subsidiary of Dongfeng Motor Group, Dongfeng Commercial Vehicles, is to include the major part of Dongfeng's medium and heavy-duty commercial vehicles business.

In 2011, Dongfeng sold 186,000 trucks, of which about 142,000 trucks were made by the part of the company to be included in the subsidiary DFCV.

The Volvo Group sold 180,000 heavy-duty trucks in 2011, making it the third-largest global maker behind Dongfeng, and top-placed Daimler of Germany. Dongfeng and Volvo are each to appoint four members to the DFCV management team. Dongfeng is to nominate the managing director, while Volvo is to name the chief financial officer.