PARIS - PSA/Peugeot-Citroen and Ford Motor Co. will form a FF2 billion ($363 million) joint venture to build a new generation of small diesel engines.
The 50-50 venture is the first major collaboration between the two automakers.
PSA, with its expertise in diesel engines will take the technical lead in the joint venture. A project team located at PSA's La Garenne-Colombes technical center, near Paris, will be responsible for engineering. The team will include Ford engineers.
The engines will be produced at the Francaise de Mecanique plant in Douvrin, France, a joint-venture between PSA and Renault. Planned production is 1,000 units a day for PSA and 500 for Ford.
The range will include three- and four-cylinder, common-rail, direct-injection engines from 1.2-liter to 1.5-liter capacity. They will power the successors to the Citroen Saxo, Peugeot 106, Ford Fiesta and Ka.
For PSA the engines will replace the current TUD engine range that powers the Citroen AX, Saxo and Peugeot 106. Francaise de Mecanique has built more than one million units of these engines since they were launched in 1988.
For Ford the new engines will complete the lower end of its range. Its smallest diesel currently is the 1.8-liter, used in the Fiesta.
'For these small engines, none of us had enough volume to fill a plant,' said Jacques Nasser, president of Ford Automotive Operations. 'A joint-venture is more efficient and PSA has a strong record with diesel engines.'
Nasser said negotiations took four months. In the 1970s and 1980s Ford bought diesel engines from PSA for the Scorpio/Granada and Sierra.
PSA Chairman Jean-Martin Folz said the deal was 'our answer to some people who say we are not an internationally-minded enough.'