Mazda is nearing a decision to produce cars in Europe.
The Ford-controlled Japanese carmaker wants a production base in the euro zone to grow sales and cut exposure to currency variations.
Mazda is expected to decide next month to build a replacement for its lower-medium 323 or a new supermini at a Ford plant in Europe.
Japanese carmakers exporting from plants in Japan have been harmed by the strong yen against the weak euro.
'The yen is killing us,' said Jan Brentebraten, president of Mazda Europe. 'Small cars are hit especially hard. We cannot charge the prices we need to charge. The production of Mazdas in Europe cannot be postponed any longer.
'By November we will have a decision on where to establish production,' he said. '[It will be] either in Cologne, Spain or some other continental country, preferably in the euro zone.'
Brentebraten would not specify which Mazda model would be built in Europe. 'It should be a popular volume model because the smaller the car, the larger the benefit,' he said.
'But whatever the model, if a positive decision is taken, it will take well over a year to implement European production.'
Nigel Griffiths, production analyst for Standard & Poor's DRI in London, said: 'The easiest solution for Mazda is not to have its own assembly facility, but to build a vehicle at a Ford plant on a shared platform - say the 323 on the Focus platform.'
Griffiths believes the 323 could share the Focus platform starting in or after 2003, when the Focus is due for renewal. Mazda is scheduled to renew its upper-medium 626 in late 2001.
But Mazda's options could be limited by Ford's capacity reduction plans under its European restructuring program, which call for 100 percent utilization within two years.
'An existing plant with Ford could be the best option,' Griffiths said.
If necessary, an additional assembly hall could be built at a Ford plant to accommodate Mazda, he said.
Ford produced a small number of Mazda 121 models - basically rebadged Ford Fiestas - at Ford's Dagenham plant in England until earlier this year. The 121 was replaced by the Mazda Demio, which is imported from Japan.
Bradford Wernle contributed to this story