As a result of the business alliance, both companies will gradually increase revenue and profit, enhance the competitiveness of their products and reduce costs

Scania

"The aim of the agreement is to establish a long-term business alliance in order to increase the market potential for both companies," Scania said in a statement.

The two also hope to further expand their ties by developing truck sales in growing markets like South East Asia and China.

"We are not going to go anywhere just in Japan. Looking at emerging markets, we can go global with Scania, which doesn't have medium-duty trucks," Hino president Tadaaki Jagawa said.

The deal is the second Asia-Europe cooperation in trucks after DaimlerChrysler expanded its ties with Mitsubishi Motors last year.

No merger

The alliance does not involve any cross-ownership between Hino and Scania.

Mr Jagawa said Toyota, which has a 50.1% stake in Hino, has no interest in taking Volvo's stake in Scania.

The European Commission in 2000 blocked Volvo's takeover of Scania and gave it until January 2004 to sell its 45% stake.

Hino is the strongest of Japan's four truck makers, which have been hit by a decade-long slump in domestic demand.

Scania is the third largest maker of trucks and buses in Europe.

Alliance goals

"As a result of the business alliance, both companies will gradually increase revenue and profit, enhance the competitiveness of their products and reduce costs," Scania said.

The alliance is expected to start with the introduction of Scania tractors on the Japanese market under the Hino brand name, and the use of Hino engines in some Scania vehicles.

The companies said they expected to make cost savings from combined development of emission control systems to helping them meet new environmental standards for diesel engines.