Volvo Compact Equipment last week announced it will start production of backhoe loaders in Mexico in order to increase volumes and improve profitability.

The production will start in early 2009 in the existing Volvo Bus facilities in Tultitlán in the state of Mexico (about 40 kilometers north of Mexico City).

The company plans to produce center-mount backhoe loaders, models BL 60 and BL 70, at the facility in Mexico. These models are currently produced in Wroclaw, Poland, and mainly sold to North America. Initially, the production will be assembly of CKD-kits delivered from the Wroclaw, Poland, backhoe loader factory.

According to the company, Mexico is a member of the North American Free-Trade Area and its economy is closely linked to the U.S. economy, which means reduced currency risk in relation to the U.S. dollar.

Mexico is a growing industrial location with an excellent supplier base close to the key markets of North America as well as Latin America with excellent logistics infrastructure in roads and ports, the company said. With a production base in Mexico, Volvo Compact Equipment expects to be able to profitably grow backhoe loader volumes in Latin America as those economies develop.

Furthermore, the Volvo Bus operations in Mexico have available assembly space and paint-shop capacity, which means that the start-up investment is limited. Volvo Bus Mexico has the capabilities and the team to support this expansion of the Volvo Group operations in Mexico and there is a history of successful cooperation between Volvo Compact Equipment and Volvo Bus in its shared facility in Wroclaw, Poland.

“Starting backhoe-loader production in Mexico opens up a great opportunity for Volvo Compact Equipment to sell more machines, and at the same time improve our profitability significantly,” said Andy Knight, president of Volvo Compact Equipment. “This is the logical and crucial next step in our Path to Profit 09 strategy.”

As for the Wroclaw operations, the move of the center-mount machines to Mexico will release capacity to meet increased demand for side-shift machines, which are mainly sold in markets outside of the Americas. Wroclaw will remain the core plant for the backhoe loader product area and will, in the start-up phase, supply CKD-kits to the production in Mexico.