PARIS - Toyota Motor Corp. and PSA/Peugeot-Citroen SA this week will announce a plan for cracking the auto industry's toughest nut - the small-car segment - with a jointly developed 800cc-to-1.0-liter car to be priced at less than 8,000 euros, or about $6,750.
As previously announced, Toyota President Fujio Cho and PSA CEO Jean-Martin Folz will sign the agreement for the joint venture Thursday, July 12, in Brussels. The setting - Brussels is the seat of the European Union as well as Toyota's European operations - is meant to underscore the European character of the car, sources said.
Production is expected to range from 300,000 to 400,000 a year starting in 2004. The car's price will have to make a 'sharp break' from what's available, said Vincent Besson, marketing head of PSA's Citroen unit.
Poland is seen as the leading candidate for a factory site, followed by the Czech Republic, Hungary and Slovakia. That's because Eastern Europe and its emerging economies are a prime target for the car.
The two carmakers hope to cut costs by pooling their know-how and sharing development expenses. The car is expected to cost less than $4,000 to produce, according to a source.
Toyota, which builds 5 million cars annually, brings its manufacturing expertise and reputation for quality to the venture.
PSA brings its feel for the European market and its experience in small-car production and in diesel engines to the venture.
PSA is expected to provide diesels for 30 percent of production, while the other 70 percent would be equipped with Toyota gasoline engines.
Culturally, Toyota and PSA are seen as a good fit; they both cherish independence.
'They go instead for collaboration in a lot of specific target areas,' said Amer Mushta, a consultant with PricewaterhouseCoopers in London.
Poland likely site
Poland appears to many observers as the most likely choice for the plant because Toyota already has a transmission plant in the south of the country. The Polish government is likely to do its utmost to attract the Toyota/PSA plant to make up for dwindling output at two Daewoo plants in the country.
But Czech authorities will be desperate to attract jobs to their northern industrial area, where the coal mining and steel industries are struggling and labor is highly skilled.
Hungary also is in the race after BMW rejected a site there to build its X3 sport-utility. But one drawback for Hungary is its high wages, which have risen substantially because of the Audi plant in Gyor, in the west of the country.
Said an executive at a big supplier: 'Typically, manufacturers make this kind of decision at the last minute. They'll go for whoever pledges the most attractive subsidy.'
Automotive News Europe reporters Georg Auer and Edmund Chew contributed to this report