(CNN) -- A Swedish truck and bus maker that assembled trucks in Iraq during the Saddam Hussein era has signed "an agreement in principle" with the government to open an assembly plant next year.
Swedish truck and bus maker Scania is to reopen a former plant in Iraq.
The company, Scania, issued a statement on its Web site confirming the deal to produce 500 trucks ordered by Iraq, with work starting during the third quarter of 2009.
The work will be performed in the same Iskandariya factory south of Baghdad where the company's previous operation was housed. The operation comes under the auspices of Iraq's State Company for Automotive Industry.
The deal reflects the Iraqi government's efforts to rehabilitate an economy decimated by warfare.
"Scania has the necessary qualifications to satisfy the Iraqi government's desire to begin local production quickly. Assembly of the 500 trucks initially ordered is expected to employ about 500 people. The facility will be designed for the production of 3,000 vehicles per year," says Klas Dahlberg, vice president in charge of Scania's sales in the Middle East.
The company said Iraq had been one of its largest markets during the 1980s. The Iskandariya factory assembled 3,900 trucks in 1981, Scania said, and many of the trucks assembled there during that era remain in service.
The company said a memorandum of understanding signed by both sides specifies that Scania will work with an Iraqi distributor and "will assume responsibility for installation of production equipment as well as employee training."
"In collaboration with our Iraqi distributor, we will also invest in the establishment of a service network in the country. Even today, there is a great need for workshops to take care of vehicles that operate in international traffic to Iraq," Dahlberg said.
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