Sweden's AB Volvo and French car maker Renault SA will join together to create the world's second-largest manufacturer of heavy trucks in a deal worth $1.6 billion.

Volvo will buy Renault's RVI truck division and its U.S. subsidiary Mack Trucks Inc. in exchange for a 15 percent stake in the Swedish firm, making Renault Volvo's biggest shareholder, the companies said Tuesday.

Renault will buy an additional 5 percent of Volvo's shares on the open market and hold its stake for at least three years, the companies said.

The deal will help Renault's RVI compete more effectively. Volvo has been seeking a partner since European authorities blocked its proposed $6.9 billion takeover of Swedish rival Scania last month.

"We feel the combination has the scale, skill and resources . . . to be a truly competitive company," Volvo's chief executive, Leif Johansson, told a joint news conference in Paris with Renault chairman Louis Schweitzer.

The combination demonstrates how higher research costs and declining prices are pushing car manufacturers into each others' arms.

The deal, which has to be approved by European and U.S. antitrust authorities, would give Volvo a 25 percent share of the European and American markets and a significant presence in Latin America and Asia. Production is estimated at 165,000 trucks.

The new company would be second only to DaimlerChrysler AG's Mercedes Benz in heavy truck group rankings.