Volvo plans to enter into a Strategic Alliance on axles with ArvinMeritor. A Memorandum of Understanding has been signed between the two companies. Final agreements are planned to be made during first quarter 2004.

The Volvo group would take advantage of ArvinMeritor's expertise and leading volume base. In the future ArvinMeritor would be responsible for the manufacturing and supply of driven and non-driven axles for the Volvo Group's European truck and bus products.

``Following the acquisition of Renault VI and Mack Trucks in early 2001, immediate efforts have been made to capture identified synergies and cost saving opportunities. In this respect new consolidated product plans for engines, transmissions and axles have been decided and are currently under implementation'', says Lars-Goran Moberg, President and CEO of Volvo Powertrain. ``In 1998 Volvo Trucks outsourced driven axles and divested its axle operations in Lindesberg, Sweden, to ArvinMeritor. The Strategic Alliance would be a logic extension of an already successful business model. It would both free resources and result in substantial cost savings.''

The Volvo Group's axle plant in St. Priest and its foundry in Venissieux, which has specialized on axle housings, would be structured into two joint ventures. ArvinMeritor would acquire the majority ownership in these joint ventures. The manufacturing of non-driven axles at Volvos transmission plant in Koping would be outsourced to ArvinMeritor, who also would acquire all related assets. This would enable Koping to concentrate on its core business becoming a Volvo Group Global Supplier of Transmissions. The finalization of the Strategic Alliance is conditioned to approval from concerned competition authorities and fulfilled negotiations/consultations with involved union representatives.