Boeing boost to Volvo as China venture suffers

Volvo Aero, a subsidiary of Swedish industrial group Volvo, said on Thursday it had landed a two-billion kronor contract with General Electric to make engine parts for its Boeing 777 planes.

“This agreement is an indication that we are competitive in production-based transactions,” Volvo Aero’s vice president of business development Anders Nilsson said in a statement.

In accordance with the agreement, which stretches over a 10-year period, the Swedish company will provide components for the engines used on Boeing 777-200LR and 777-300ER planes.

Production of the parts is scheduled to get underway next year in Volvo Aero factories in Trollhättan in southwestern Sweden.

The company’s production facility in the southern Norwegian town of Kongsberg already supplies different components for the aircraft engine.

Meanwhile, the industrial vehicles arm of Volvo has closed one joint venture in China and another is set to suffer a similar fate due to huge operating losses, state press reported on Thursday.

Volvo’s engine joint venture with China’s First Automotive Works Corp (FAW), one of the mainland’s largest state auto companies, was shut two months ago after accumulating large losses, the Shanghai Securities News reported, citing Wu Yuzhang, vice president of Volvo Trucks Asia, as saying.

Volvo’s company with China National Heavy Truck Corp (CNHTC) is also on the chopping block, a move that would terminate the overall partnership with CNHTC, Wu said.

Volvo set up the engine joint venture with FAW and CNHTC last year and the projects had targeted annual production of 50,000 engines by 2010.

Wu said all three of Volvo’s joint ventures in China have suffered significant losses in China’s competitive market that is suffering from a major production glut.

The report did not provide any loss-making figures.

The Swedish maker of trucks, buses, aviation and marine engines and construction equipment, reported at the end of October a 151-percent rise in third-quarter profits.

It registered net profit of 2.93 billion kronor during the period, up from 1.16 billion a year ago.