Volvo plans to cooperate with Dongfeng Motor

Volvo plans to terminate its relationship with one of its two partners in China and cooperate with Dongfeng Motor Co., Ltd. It's reported that Jinan Huawo Truck might be given up by Volvo, but another shareholder of Volvo - China National Heavy Duty Truck Croup Co., Ltd (CNHTC) unveiled yesterday that it is sill hoping to continue their cooperation.

Currently Volvo is still holding talks with Dongfeng. Once Volvo made the decision to stop its cooperative relationship with CNHTC, Volvo is to see a loss of 500 million Koruna (amounting to $72million), of which 300 million Koruna has been invested in the founding of the plant and the surplus fund accounts for other cost.

Volvo didn't give any detailed reason for the move. According to Volvo spokesman Maarten Wikforss, the engine plant, co-established by Volvo and CNHTC, has weak deliveries due to a shortage in demand.

In 2004 CNHTC, Volvo and FAW had intentioned to build a joint-venture to produce diesel engine in China. The framework agreement signed by the three parts showed that their investment volume come to RMB 2 billion. The plant was to start operation in 2005 and aim to achieve an annual turnover of 50,000 engines in 2008. But President of Volvo Great China Area announced in 2005 that the agreement had been canceled. Insiders view this move as a prediction of Volvo's split with CNHTC.