PARIS - PSA/Peugeot-Citroen and Ford will form a joint venture to make large-capacity diesel engines. The agreement, due to be announced late last week, would be the second diesel engine deal between the two groups in just over a year.
In September 1998, PSA and Ford set up a FF2 billion (euro 302.5 million) joint venture to make small-capacity diesel engines at Francaise de Mecanique, at the rate of 1,500 units a day. Francaise de Mecanique, a common subsidiary of PSA and Renault, is located in Douvrin, northern France.
The new deal will involve joint production of V-6 and V-8 direct-injection common-rail diesels over the next decade. PSA Chairman Jean-Martin Folz and Ford Chief Executive Jac Nasser were expected to announce details in Paris.
PSA and Ford will share design, development and manufacturing responsibilities. The two companies will also operate a joint factory in Europe. Total investment is likely to pass $1 billion (euro 940 million).
Analysts in Paris also said Ford could extend the relationship by using PSA's current HDi (High-pressure Direct injection) 2.0- and 2.2-liter, 4-cylinder engines for the Mondeo and Focus.
'This is a new and very different deal from the joint venture for small diesel engines,' said one source. With that earlier project, PSA is the leader in design and manufacturing.'
'The cooperation for the small diesel engines is excellent. Folz and Nasser have built up a good relationship,' said a Ford insider.
Both Ford and PSA need big, modern diesel engines to cope with broadened model ranges and tougher environmental regulations. They must also fight increasingly aggressive German competitors such as VW, Audi, Mercedes-Benz and BMW. 'If you want to impress the Germans, at the very least you need 6-cylinder diesels with a capacity of 3.5- to 4.0-liters,' said a top executive with a major European supplier.
PSA's biggest diesel engine is currently a common-rail 2.2-liter, 136hp unit. It will equip the flagship Peugeot 607 in March 2000, and will be manufactured at PSA's Tremery plant. 'The 607 will get a bigger diesel engine in the future,' said 607 Project Manager Michel Lejeune at September's Frankfurt auto show.
Ford's biggest diesel is the 1.8-liter, 91hp direct-injection unit that powers the Focus and the Mondeo.
'The Mondeo's turbodiesel is not its strong point,' admitted one Ford insider. The Galaxy minivan comes equipped with 90hp and 100hp direct-injection Volkswagen engines. Ford and Volkswagen are unlikely to make the successors to the Galaxy/Sharan together.
Ford is rumored to be considering whether to replace the Scorpio. But it will also need a big diesel engine for future Volvos - and probably Jaguars. Visiting Paris last week, Jaguar's new Chief Executive Jonathan Browning said: 'We are considering a diesel engine for the future.'
Volvo, bought by Ford early this year, currently equips its S40/V40 models with Renault's 1.9-liter direct-injection engine. Volvo's S70/V70/S80 models use Audi's 2.5-liter, 140 hp diesel. Volvo sold 51,000 diesel cars out of a total of 396,000 units last year.
The PSA-Ford deal may bring an end to further close cooperation between PSA and Renault - and will be seen as a reaction to the Renault-Nissan alliance.
Renault has already decided to buy a 3.0-liter V-6 direct-injection diesel engine from Isuzu to power the Safrane successor, due to appear in 2000. That engine will also be used in Opel models. The next generation will likely be developed with Nissan which does not currently have V-6 diesel engines.
However, PSA could choose another solution for big gasoline engines. PSA is expected to buy a V-8 gasoline engine from either Volkswagen or Mercedes-Benz to equip the 607 or a future full-size Citroen.