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Volvo CE Invests in Chinese Construction Machinery Manufacturer

Volvo Construction Equipment recently signed an agreement to make an equity investment of 70 percent in Shandong Lingong Construction Machinery Co. (Lingong), a major construction machinery manufacturer with a comprehensive dealer network throughout China. Volvo CE’s investment in Lingong is subject to regulatory approval.

“This is another important step in Volvo’s growth strategy for China and Asia,” said Leif Johansson, president and CEO of AB Volvo. “I am convinced this cooperation will be very beneficial for both parties, from an industrial as well as from a commercial standpoint.”

Lingong, based in Linyi in Shandong Province, had sales of RMB 2 billion in 2005 (about US $250 million). The company has approximately 1,800 employees.

“This is a long-term strategic investment that will put Volvo CE in a very strong position in China’s construction equipment market,” said Tony Helsham, president and CEO of Volvo CE. “The cooperation with Lingong is a significant step in our China vision and global strategy. It allows us to strengthen our position, serving customers with different offerings beyond our current premium products. At the same time, we will continue to develop and produce our high-end Volvo wheel loaders in our facilities in Eskilstuna and Arvika, Sweden; Asheville, N.C.; and Pederneiras, Brazil.”

China is the world’s largest market for wheel loaders. The total market for 2005 was approximately 110,000 units. Lingong is the fourth-largest producer of wheel loaders in China with a market share of around 11 percent in 2005.

“Going forward, Lingong and its suppliers will play an important role in supporting Volvo CE’s global development and sourcing,” said Keith Ellis, president of Volvo CE in China.

Volvo CE intends to leverage Lingong’s current management, R&D center and operation to the fullest extent possible. Lingong will continue to build its strong position with entry-level products.

In addition to 16 different models of wheel loaders, Lingong also has a broad range of backhoe loaders, road rollers and excavators.

Both parties have agreed not to reveal any financial details before the closing of the arrangement, which is expected to take place in the near future. The action will not have any significant impact on Volvo’s earnings or on the financial position of Volvo, the company said.

Headquartered in Brussels, Belgium, Volvo CE develops, produces and markets equipment for construction and related industries. Its products include a full range of wheel loaders, hydraulic crawler and wheeled excavators, articulated haulers, motor grades, backhoe loaders, compact wheel loaders and excavators and skid steer loaders.

Founded in 1972, Shandong Lingong Construction Machinery Co. develops, manufactures and markets a broad range of wheel loaders, excavators, backhoe loaders and road rollers. The company has built a nationwide distribution and service network of approximately 170 dealers, a significant network of service agencies and 10 parts outlets in China. Its products are distributed across China and exported to Australia, the Middle East, Malaysia and Mongolia.

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