Peugeot, Toyota In European Small Car Venture.(Brief Article)

Toyota Motor Corp. said it signed a $1.28 billion joint-venture agreement with French carmaker PSA Peugeot Citroen to jointly develop and produce small cars for the European market. Production is set to start in 2005. The plant set up under the 50-50 joint venture should have a capacity of 300,000 a year, the companies said.

Toyota President Fujio Cho and Peugeot CEO Jean-Martin Folz signed the agreement in Brussels. "This kind of partnership between independent carmakers is the right way to meet the challenges of global markets and customers' changing demand," Folz said Cooperating on the venture will bring "savings in the hundreds of millions of dollars" to the two companies, he said.

The companies said new 1 liter gasoline and 1.4 liter diesel engine cars will be mainly marketed at European consumers offering a low price, fuel-efficient and environmentally friendly vehicle. They will be marketed under the Toyota, Peugeot and Citroen brands.

The companies said a decision on the location of the plant would be announced later this year. It is expected to be located in somewhere in eastern Europe, with Poland and Hungary among venues under consideration.

Toyota's move is also part of growing efforts among Japanese automakers to expand their share in the European market by localizing production and putting the focus on small cars.

The companies said the subcompact cars would be cheaper than the companies' current smallest models, the Peugeot 106, Toyota Yaris and Citroen Saxo.

As well as considering eastern Europe as a likely venue for the production plant, the companies hinted the former communist East would be an important market. "We have clearly identified emerging demand for a new type of car in an expanded Europe," Folz said.

"This car will be a lean, modern four-seat model that features that most advanced technologies in the areas of safety, reliability and environmental design," he added. Folz said he was confident the venture would secure clearance from European competition regulators.

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