German heavy engine manufacturer Deutz extended a decade-long partnership with Swedish industrial conglomerate AB Volvo on Monday, strengthening ties to its biggest customer. Deutz will remain the sole supplier of diesel engines ranging from 4 to 8 litres in size for Volvo's construction equipment, according to a deal signed.
It takes effect at the start of 2014 and replaces an existing 15 year contract that expires at the end of 2013. Volvo, the second largest shareholder in Deutz with 6.7 percent, opted last June to develop its own Euro 6 truck engines instead of procuring them from Deutz.
Since then the two have been in negotiations over a contract for Deutz to develop and supply industrial engines that fulfil the upcoming Tier 4 emission norms. "It's an open ended contract," a Deutz spokesman said, adding that the Cologne-based company supplies every year tens of thousands of engines to Volvo. Shares in Deutz rose 2.6 percent by 0835 GMT, making it the third-biggest gainer in the German small cap index. Founded in 1864 by Nicolaus Otto, the inventor of the modern four-stroke internal combustion motor, the company is home to the world's first engine factory.