STOCKHOLM -- The world's second biggest truck maker, Sweden's Volvo, said on Monday it planned to outsource axle production to ArvinMeritor, a supplier of motor vehicle industry modules and components.
"A memorandum of understanding has been signed between the two companies. Final agreements are planned to be made during first quarter 2004," Volvo said in a statement but did not give a value for the accord.
The deal involves the transfer of 943 jobs from three Volvo facilities to ArvinMeritor. The Volvo group employs 75,400.
"It will bring substantial savings, but we're not giving a specific figure. It is part of the announced 3.5 billion crown ($454.7 million) synergies after the acquisition of Renault VI and Mac in 2001," Volvo spokesman Marten Wikforss told Reuters.
Volvo's shares were up more than three percent in late afternoon trade.
Under the deal, Volvo's French axle plant in St Priest and its foundry in Venissieux, which has specialised in axle housings, would be turned into two joint ventures in which ArvinMeritor would buy majority.
ArvinMeritor would also take over the manufacture of non-driven axles at the Swedish transmission plant in Koping.
Volvo said that in the future ArvinMeritor would manufacture and supply driven and non-driven axles for the Volvo Group's European truck and bus products.
"In 1998 Volvo Trucks outsourced driven axles and divested its axle operations in Lindesberg, Sweden, to ArvinMeritor," Volvo said in a statement, calling the alliance a logical extension of a business model.
"It would both free resources and result in substantial cost savings."