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Komatsu Ltd. said Thursday it has reached a basic agreement with a Belgium-based construction equipment unit of Sweden’s AB Volvo to jointly produce and develop construction equipment components.

Komatsu, Japan’s largest construction machinery manufacturer, said it will shift production of its wheel-loader cabs to a Volvo Construction Equipment plant in Hallsberg, Sweden, in the beginning of 2003.

The cabs for Komatsu’s wheel loaders produced in North America and Europe are currently outsourced to a component maker in Germany.

Komatsu hopes the move will cut costs by improving volume efficiency.

The two companies are also considering linking up to supply and develop drivelines, except for engines. The talks are expected to wrap up by the autumn, Komatsu said.

The company said it started tieup talks with Volvo CE in November.

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