Introduced in the middle of the 2004 model year, the second generation S40 (known as the 2004.5 Volvo S40) introduced a new design based on the Volvo P1 platform built at the Volvo Cars factory in Ghent, Belgium. At the same time, the V40 was replaced by the V50 estate, also based on the P1 platform and built in Ghent.
The chassis for this car and the majority of its components were developed by Volvo, however similar mechanical components can be found in the Mazda3 and the European Ford Focus. The engine, a 2.5L 5 cylinder (B5254T3, and B5254S respectively for the turbo and naturally aspirated models) is the latest generation of Volvo's 5 cylinder engines. These inline fives have been continually developed by Volvo since the debut of the engine in the 850, in 1993. The top of the line S40 T5 AWD, as well as the 2.4 and 2.4i, powertrain is still made by Volvo. The transmission is developed with Getrag at Volvo's Koping Transmission Center in Sweden, and the AWD system bought from Haldex Traction of Sweden.
Source: Wikipedia, 2011