July 12, 2005

Paris, France - Peugeot-Citroen has signed a co-operation agreement with Mitsubishi Motors that will see the companies go into joint production of new all-wheel-drive vehicles.

The French group said the final stage of the agreement was signed on Monday. Mitsubishi will produce 30 000 vehicles a year for the group at a new Japanese plant.

Each of the three companies - Mitsubishi, Peugeot and Citroen - plans to launch new all-wheel-drive cars, or SUVs, in Europe in 2007. Mitsubishi will launch its own version in Japan late this year.

"The new SUVs will broaden Peugeot and Citroen's product range and will enable the two brands to reach new customers by entering an expanding market segment," PSA said.

PSA chief executive Jean-Martin Folz was known to be opposed to SUVs, which are maligned for their large size and high fuel consumption.

The market for them in Europe has grown considerably in recent years, with SUVs now estimated to represent up to five percent of the European sales.

The new PSA vehicles will be equipped with Mitsubishi engines for the petrol version and PSA's own HDi diesel engines for the diesel model, PSA said.

For Mitsubishi, which is in difficulties, the agreement will enable the group to optimise production at its new plant and increase productivity.

Peugeot's arch-rival Renault has seen a revival in its fortunes since it forged a partnership in 1999 with Nissan. The two companies have since built up an important cross-shareholding.

Peugeot had previously ruled out such a deal and said it had no plans to take a stake in the Japanese company.

The joint-statement made no mention of the future plans of the two companies, saying only that the deal was between "collaborative partners". - Sapa-AFP