Volvo Aero and Swedish Government investing SEK 126 M to develop aircraft engines for the future

Volvo Aero and Swedish Government investing SEK 126 M to develop aircraft
engines for the future

Volvo Aero and the Swedish Government are each investing SEK 63 M when the
government authority Vinnova distributes money for the first time to a
commercial demonstrator program in the aerospace industry.

The investment will be used in the company's development of lightweight
components for more fuel efficient and thereby more environmentally compatible
aircraft engines.

Volvo Aero's application “Swedish demonstrator for environmentally compatible
aircraft engines” is receiving part financing from Vinnova of SEK 63 M, which
will be paid in installments from 2007 through 2010. Volvo Aero will invest the
same amount during the period. 

Vinnova's decision is positive for Volvo Aero, which has worked for sometime for
Sweden to gain a national program to develop more environmentally compatible air
transport.

“The reply was highly pleasing, since Sweden has never previously had a
commercial demonstrator program in aviation. Aviation faces major challenges to
deal with environmentally,” states Volvo Aero's President Olof Person. “We can
contribute with lightweight technology so that the aviation industry combined
shall achieve the emissions targets agreed by the entire industry in Europe.” 

Vinnova's aim with the so-called “Aviation technology and demonstrator program
(Swedish acronym FLUD) is to promote sustainable growth in Sweden through
needs-motivated research. 

Primarily, Vinnova wants 
- to facilitate companies to participate in international commercial
demonstrator programs
- to increase the share companies have in commercial product development
programs 
- to create national propagation effects
- research institutes as well as small and medium-size  (SME) companies to
participate.

All of these goals coincide with Volvo Aero's FLUD project, “Swedish
demonstrator for environmentally compatible aircraft engines.”

At the European level, Volvo Aero is participating in the forthcoming Joint
Technologies Initiatives (JTI) within the EU's seventh framework program. The
initiative in the aviation field is designated “Clean Sky,” in which Volvo Aero
is participating within SAGE (Sustainable And Green Engine), in cooperation with
Rolls-Royce, Snecma, MTU and others. The company was recently named “Associate
Member” within SAGE, a highly significant confirmation that Volvo Aero is
working with lightweight technologies that are important for the entire
industry.

Volvo Aero is also participating in a major cooperation with American engine
manufacturers, whose aim is also to reduce fuel consumption.

March 21, 2007

For further information, please contact Henrik Runnemalm, responsible for FLUD
at Volvo Aero, +46 (0)70 282 5831, or Andreas Svenungsson, responsible for
Public Affairs Volvo Aero, +46 (0)70 205 7199, or Vilgot Claesson, Transport
Unit, Vinnova, +46 (0)8 473 3056.

Volvo Aero develops and manufactures components for aircraft and rocket engines
with a high technology content in cooperation with the world's leading
producers. Volvo Aero offers an extensive range of services, including sales of
spare parts for aircraft engines and aircraft, sales and leasing of aircraft
engines and aircraft, as well as overhaul and repair of aircraft engines. Volvo
Aero 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.