While the future of Volvo Car Corp. is in doubt, Volvo's truck arm is strengthening itself.
Volvo Truck Corp. last week bought 12.9 percent of fellow Swedish truckmaker Scania AB. Volvo also wants to talk to Scania shareholders about 'combining' the two companies.
Meanwhile, Volvo Trucks North America Inc. plans a $148 million expansion of its Dublin, Va., assembly plant, according to a statement from the governor's office.
The Scania move took the industry by surprise. Volkswagen AG is also known to be interested in Scania.
'Scania is a very good alternative for Volvo,' said Leif Johansson, CEO of AB Volvo. 'A combination would create Europe's largest and the world's second-largest manufacturer of heavy trucks and buses' after DaimlerChrysler AG.
'It would be a manufacturer with strong brands, significant development resources and large volumes - particularly in the critical diesel engine area,' Johansson added. 'In addition, Scania and Volvo are similar in terms of company culture and business values.'
The deal cost Volvo 5.2 billion Swedish kroner ($643 million).
The Virginia plant, known as the New River Valley facility, has been building heavy trucks since 1974 and currently employs 2,400 people. The expansion will add 1,277 jobs.
Volvo Trucks North America declined to comment on the announcement. It was included in Gov. Jim Gilmore's state of the commonwealth address last week.
In a related development, Volvo and the UAW reached a tentative six-year agreement for workers at the Dublin plant. A ratification vote was scheduled for Sunday, Jan. 17.