Chennai: Heavy commercial vehicles manufacturer Ashok Leyland Limited, the Indian flagship of the Hinduja Group, has signed a framework agreement to acquire the truck business unit of Avia, Prague.

Avia makes the D Line trucks in the 6 to 9-tonne gross vehicle weight (GVW) range and has marketing footprints in Europe. The acquisition covers the facility at the heart of the Czech capital, with an annual production capacity of 20,000 vehicles, which is supported by a state-of-the-art cataphoretic paint shop and R&D facilities.

The sale is subject to the completion of certain conditions as well as corporate and statutory approvals by both Ashok Leyland and Avia. It is expected that the transaction will be closed by the end of August 2006.

"Avia is part of our inorganic growth plan and is a significant step in securing a beachhead in the European Union and the Eastern European markets. The acquisition will also give us a modern, international vehicle for our light and medium commercial vehicle range of trucks for India and other export markets", said R Seshasayee, managing director.

Since their launch in 2001, the D series trucks consisting of 6 tonne, 7.5 tonne and 9 tonne GVW models are marketed in the Czech Republic, Hungary, the UK, Ireland, Italy, Slovakia and Spain. With a width of 2.15 metres, the D series trucks have a modern, compact cabin with both day and sleeper versions. They are powered by 150 hp / 170 hp Cummins ISB engines and feature ZF 5.42 and ZF 6S 850 gearboxes.

In early June, Avia unveiled D120, a 12-tonne model as well as D110 and D100, 11- and 10-tonne models respectively. The new models also feature the all-new 4.5 L Cummins ISB Euro IV engine with Selective Catalytic Reduction (SCR) technology. The new Cummins engines offer power outputs of 140 hp, 160 hp and 185 hp.

Spelling out Ashok Leyland's plans for AVIA, Seshasayee mentioned that although the present volume of sales from Avia was limited, there was a good potential to scale up, through new markets such as the Middle East, South East Asia, Russia and Ukraine and by consolidating and strengthening existing dealership arrangements in Europe.

Seshasayee expressed his confidence about the potential to save material costs through component and aggregate sourcing out of low cost countries. The planned scale up of Avia operations will absorb the current strength of around 275 employees. New products from the Ashok Leyland range, in line with market expansion plans to be drawn up, will be inducted into the Avia portfolio, in due course.

Started as an aircraft and engine manufacturer in 1919, Avia diversified later into trucks and signed licence agreement with Renault in 1967. In 1995, 50.2 per cent share in Avia was acquired by Daewoo Motor Corporation Limited, which invested to upgrade Avia's production capabilities and product technology to international standards, leading to the launch of the D Line trucks.

Though the D Line truck had a good brand equity in the European market, the bankruptcy of Daewoo in 2000 affected the fortunes of the company. In 2005, SGM International, a subsidiary of Odien Capital Partners, L.P, took over the company and undertook an aggressive restructuring and investment programme resulting in the company's revival and expansion of the product range to 12 tonne.