Volvo buys majority share of Lingong

Volvo Construction Equipment has signed an agreement to buy a 70% share of China-based Shandong Lingong Construction Machinery for an, as yet, undisclosed sum. Volvo's investment in the Lingong, which recorded a turnover of RMB 2 billion (US$ 250 million) in 2005, is subject to regulatory approval. Both companies have said that the value of the deal will be revealed when the agreement is approved, which Volvo expects will happen in the “near future”. “This is a long term strategic investment which will put Volvo in a very strong position in China's construction equipment market,” said Volvo president and CEO Tony Helsham. “The cooperation with Lingong is a significant step in our vision for China and our global strategy.”

China is the world's largest market for wheeled loaders with sales of around 110000 units in 2005. Lingong is China's fourth largest producer of wheeled loaders with a market share of around 11% in 2005. According to Mr Helsham, the investment will enable Volvo to strengthen its position by serving its Chinese customers with other construction equipment beyond its current premium products. “We will continue to develop and produce our high end wheeled loaders in our facilities in Eskiltuna and Arvika, Sweden, Asheville, US and Pederneiras, Brazil,” said Mr Helsham.

Lingong, which is based in Linyi in China's Shangdong Province is expected to continue to build entry level products, which currently includes 16 different wheeled loaders models, backhoe loaders, road rollers and excavators. “With Volvo's product support, technology and financial strength behind us, we will be well positioned to further develop the Lingong brand in China, as well as expand overseas,” said Lingong chairman Wang Zhizhong.

Although the financial details of the deal have been withheld, Volvo has said that the deal will not have any significant impact on Volvo's earnings or on the financial position of Volvo.