AB Volvo’s board of directors last week announced it has decided to invest slightly more than SEK 1.7 billion (about U.S. $240 million) in Volvo Powertrain. The investment will result in manufacturing capacity for heavy diesel engines increasing by 20 percent and capacity for heavy gearboxes increasing by 50 percent.

As a result of increased demand for the Volvo Group’s products in emerging markets such as Eastern Europe and Asia, production requirements for heavy diesel engines and heavy gearboxes are also rising. To meet this demand, Volvo’s board of directors has decided to make the investment in the period through 2009.

The foundry and production plant in Skövde, Sweden, where production capacity for heavy diesel engines will be increased by 20 percent, will account for a large part of the investment, slightly more than SEK 1.1 billion (U.S. $155.3 million). The investment there will comprise machinery, premises and environment-enhancing measures.

In Köping, Sweden, where production of gearboxes is conducted, the investment will amount to SEK 400 million (U.S. $56.5 million), which will increase production capacity for gearboxes by 50 percent. In addition, minor investments will be made in a number of Volvo Powertrain’s plants in other parts of the world, to ensure that industrial systems are adjusted to the higher production capacity.