Agreement between Volvo and Deutz finalized

AGREEMENT BETWEEN VOLVO AND DEUTZ FINALIZED Volvo and Deutz have signed an enlarged cooperation agreement which is based on their intentions that were announced earlier this year. The agreement represents an investment for Volvo amounting to a total of SEK 1 billion, including the acquisition of a minority shareholding of 10 % in Deutz AG. As a result Deutz will become Volvo's main supplier of small and medium sized diesel engines for commercial products. At the same time Volvo will concentrate its own diesel activities to heavy duty engines. The planned and earlier announced agreement concerning an enlarged cooperation between the Swedish automotive and transportation equipment group, Volvo, and the German diesel engine manufacturer, Deutz, has been finalized. As a result of the final agreement, which has been signed by the heads of Deutz and Volvo, Deutz will emerge as Volvo's main supplier of small and mid-sized diesel engines, and the future development of mid-sized engines will be carried out jointly between the companies. Following the agreement with Deutz, Volvo will concentrate its operations within diesel engines for commercial products, to heavy duty engines with 8-16 liter cylinder displacement. Such engines will in the future also be made available to Deutz. According to the Volvo CEO, Leif Johansson, the agreement is to be seen as a further step in Volvo's efforts to concentrate to its core businesses and activities. Apart of increased competitiveness for Volvo's commercial products, the new cooperation will result in substantial cost savings. "For Deutz, the agreement with Volvo represents a logical step in the recent development of the Group" announced Anton Schneider, CEO of Deutz AG. "Via proactive participation in the ongoing restructuring of the industry, we plan to emerge as one of the world's leading independent manufacturers of engines for commercial products, both for automotive, off-road and industrial applications." To demonstrate the long term commitment, Volvo has also acquired shares in Deutz AG from Deutsche Bank, corresponding to a minority shareholding of 10%. October 13, 1998 (DeutzAgreement-eng.doc) (DeutzAgreement-eng.pdf)