Volvo invests SEK 1.1 billion in Eskilstuna, Sweden

Volvo invests SEK 1.1 billion in Eskilstuna, Sweden

Over the next three years, Volvo Construction Equipment (Volvo CE) will invest
nearly SEK 1.1 billion in its Component Division in Eskilstuna, Sweden. Work
will begin in the spring.  The money will be spent in extending the factory, new
machine equipment, a production and assembly concept and cross-functional
working methods.

“The investment will make us more competitive and will secure jobs. I see this
as a sign that we are doing a good job”, says Jörgen Svenningsson, President of
the Component Division, which has around 1,200 employees in Eskilstuna.

The current area of 53,000 square metres will be extended to 63,000 and the
entire layout of the factory will be adapted to flow-orientated production
methods similar to those in the car industry. Money will also be invested in a
second furnace in the new hardening plant. The Component Division factory will
be a model installation in the industry.

The Component Division develops and manufactures power trains - i e axles and
transmissions - for Volvo construction equipment. Volvo CE's success in both old
and new markets has meant that the Component Division's Eskilstuna factory has
reached full capacity and is therefore unable to meet future growth targets set
by Volvo CE, despite operating with five daily shifts.

 “Nowadays it's a question of such large volumes that we are forced to change
from work-cell based assembly to line assembly”, says Jörgen Svenningsson, and
relates how the investment will make it possible in the long run to downsize to
three shifts on the processing line and two shifts on the assembly line. “It'll
also mean more flexibility while at the same time reducing vulnerability”. 

The production capacity of the Component Division has almost doubled since 2002.
The investment will mean a further doubling of that capacity in stages, without
requiring additional employees to be recruited.   

“When the transformation is completed, we will be more efficient and make more
components of a higher quality with approximately the same workforce as today,
although we may possibly need additional employees during the running-in
period”, says Jörgen Svenningsson.

The new factory was designed during the autumn and involved people from many
parts of the organisation, from the factory floor to the development division.
The trade-union organisations also took part and will also be involved in the
transformation.

“People who live with an issue on a daily basis are often in the best position
to find solutions. It's therefore important to involve as many people as
possible,” Jörgen Svenningsson adds.
Volvo has a total of 2,300 employees in Eskilstuna, of which 1,800 work with
Volvo Construction Equipment. In 2006, Volvo CE invested a total of SEK 500
million in the plants in Eskilstuna, Braås, Hallsberg and Arvika.

March 16, 2007

For further information, please contact 
Jörgen Svenningsson - President, Volvo CE Component Division, +46 (0)16-15 2030,
jorgen.svenningsson@volvo.com 
Klas Magnusson - Senior VP Corporate Communications, +32 2 482 5065,
klas.magnusson@volvo.com 
Beatrice Cardon - Director External Communications, +32 2 482 5021,
beatrice.cardon@volvo.com 


Volvo Construction Equipment is a major international company developing,
manufacturing and marketing equipment for construction and related industries.
Its products, leaders in many world markets, include a comprehensive range of
wheel loaders, hydraulic excavators, articulated haulers, motor graders and
compact equipment. Volvo Construction Equipment is part of the Volvo Group, one
of the world's leading manufacturers of trucks, buses and construction
equipment, drive systems for marine and industrial applications, aerospace
components and services. The Group also provides complete solutions for
financing and service.