TOKYO - Toyota Motor Corp.'s talks with PSA/Peugeot-Citroen about buying Peugeot diesel engines for use in Toyota vehicles in Europe are not making much progress.
'We are still talking with them, but there has been no agreement yet,' said Yoshimi Inaba, Toyota's director in charge of the Europe & Africa Division.
'We may decide later to make diesel engines in Europe,' he said. 'But at this point, we have not decided whether to produce them in Japan or Europe.'
Privately, some Toyota officials said that they think it unlikely that Toyota will buy Peugeot diesels. They added, though, that Toyota's requirements call for a low volume of diesels, so a diesel plant in Europe is also doubtful. Generally, a diesel-engine plant needs to produce 200,000 units a year to make economic sense.
Inaba also said Toyota currently has no plans for a plant in eastern Europe to make labor-intensive auto parts to supply its European assembly operations.
Inaba was speaking at a press conference following the announcement by UK Prime Minister Tony Blair and Toyota President Hiroshi Okuda of an expansion of Toyota's engine plant in the UK.
Toyota will spend about $243 million to expand the factory to supply engines to the new plant Toyota is building in France.
The expansion will add 1.0- to 1.3-liter engines to the Deeside factory, and will add an aluminum casting shop to the existing machining and assembly shops.
Currently, Deeside has a capacity of about 100,000 1.6- to 1.8-liter engines a year. Toyota is already in the process of doubling that to 200,000 by the end of 1999.
The latest expansion will raise the plant's capacity to around 350,000-400,000 units in 2001.