LONDON -- Ford Motor Co. and PSA/Peugeot-Citroen said they plan to invest 332 million euros ($397 million) in two new diesel engines under the latest phase of a partnership expected to almost double production in five years.
The carmakers said they expected to make 200,000 of each new engine annually at plants in Britain and France in the next few years, with total diesel engine production under the cooperation plan to hit 3.7 million in 2010, up from 2 million in 2004.
The new engines target the light commercial and premium passenger market. Production will start next month under the fourth phase of the carmakers' diesel-engine alliance.
"We now have the basis of the partnership in place with this family of engines," Ford of Europe Chairman Lewis Booth told reporters in London on Wednesday.
Ford will produce a 2.2-liter commercial diesel engine at its Dagenham engine plant in Britain, while Peugeot will make a 2.2-liter engine for both companies' medium-to-large executive models at its Tremery plant in France.
Ford and PSA are banking on the popularity of diesel engines in Europe amid growing pressure to cut down fuel consumption and reduce carbon dioxide emissions.
PSA Chairman Jean-Martin Folz said diesel engines were cheaper and produced the same result as hybrid petrol engines, making them more attractive at a time of high petrol prices.
Hybrids, pioneered in the volume car industry by Japanese manufacturers, burn less fuel by adding one or more electric motors to a standard petrol or diesel engine.
"They (hybrids) do not have long-term economic prospects because they are a lot more expensive to produce with the same result," Folz told reporters.
He said the two carmakers had no immediate plans to develop new diesel engines after the fourth phase but would continue to work together.
Ford and PSA have cooperated on diesel engines since 1998.