A new research and development programme, called Racer, for the promotion of laser and water jet technologies in mechanical engineering industries in Sweden is described. The programme is financed mainly by NUTEK, the Swedish National Board for Technical and Industrial Development. The programme is supported by more than 20 Swedish companies with Lulea University of Technology acting as programme manager. The sub-projects are: development of laser welding techniques for components of thick engineering materials; automation and laser welding by industrial robots; development of process technology and production equipment for laser surface treatment; laser surface hardening by Nd:YAG and diode lasers; and the development of alternative process technology for abrasive water jet cutting.