Volvo AB made a pair of announcements today regarding its truck engine business. The company said it has signed a letter of intent to supply engines to Navistar International Corp. for its International Class 8 trucks, and also announced it will develop a new 16-liter engine to be used in trucks, buses, construction equipment and marine and industrial uses.

The details of the agreement between Volvo's Powertrain unit and Navistar’s International Truck and Engine Corp. subsidiary still need to be negotiated, but Volvo CEO Leif Johansson said they have made a long-term agreement to supply Navistar with 12- to 13-liter engines.

Johannson said the engines will be produced at Volvo Powertrain's plant in Sweden, and that production will eventually be shifted to a North American plant.

"At a time when our North American truck operations are faced with serious challenges, this opportunity for growth within Volvo Powertrain is most welcome," Johannson said.

"We are very pleased that International has demonstrated confidence in our ability to fulfill the demands for the ever-stricter US emission regulations," added Lars-Goran Moberg, president of Volvo Powertrain.

Volvo also said that the first step in the consolidation of its engine program following the acquisition of Renault VI/Mack, will be a $132-million investment to develop the 16-liter engine.

"The acquisition of Renault VI and Mack provides us the necessary volume and base of expertise to develop a proprietary 16-liter diesel engine and manufacture it in-house," Johansson said, adding that new technology will allow the engine to meet all emission requirements.

The engine is being developed and manufactured by Volvo Powertrain. Volvo said it plans to use the 16-liter project as a model for an entirely new engine program to be developed within a four- to five-year period.