French auto group Renault and Sweden's Volvo said yesterday they were merging their heavy trucks divisions in a deal that makes Volvo the largest maker of heavy trucks in Europe and the second largest in the world, after DaimlerChrysler.

Volvo will acquire 100 per cent of Renault's truck division, Renault Vehicules Industriels, valuing the French company at around 14 billion kronor (€1.7 billion).

In return, Renault will secure a 15 per cent stake in Volvo. Renault's chairman, Mr Louis Schweitzer, said the company would pay €500 million for a further 5 per cent of the Swedish group's capital bought in the open market, making it Volvo's leading shareholder.