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TOKYO - Japan's Mitsubishi Motors Corp. (MMC) said on Friday it would supply 30,000 sport utility vehicles a year to PSA Peugeot Citroen for the European market in its latest bid to cut losses at underused plants.

The new SUV would be built at MMC's Mizushima factory in western Japan and would go on sale under the Peugeot and Citroen badges after June 2007.

Dogged by massive debt and a weakened brand, MMC has been looking for ways to fill capacity at its factories as sales crumble in North America and Japan.

A deal had been expected after MMC, Japan's only unprofitable car maker, said last week it was close to signing an original equipment manufacturing (OEM) pact with the French car maker.

MMC last month sealed an OEM pact with Nissan Motor Co. to supply 36,000 minicars a year in Japan. Those cars will also be built at the Mizushima plant, which worked at just 80 percent of its 500,000-unit annual capacity in 2004.

The 30,000 SUVs to be supplied to PSA would represent 6 percent of the factory's capacity utilisation rate.

MMC, held 21 percent by DaimlerChrysler AG as of Sept. 30, also said last month it would start exporting U.S.-built Galant sedans to Eastern Europe and the Middle East next year to boost utilisation at its Illinois plant.

For Peugeot -- known for seeking out attractive alliances -- the deal marks its sixth partnership with another auto maker. It now has ties with Renault, Fiat, BMW, Toyota Motor Co.p. and Ford Motor Co.

"Peugeot expressed deep interest in our four-wheel-drive vehicles, and the OEM agreement was their idea," Osamu Masuko, who took over as MMC's president and chief operating officer last week, told a news conference.

The two companies' chief executives signed a memorandum of understanding on Friday for the plan, after MMC initially approached the French car maker in September, Masuko said. A final agreement would be sealed in the spring.

The project would first target Europe, but the two groups are also considering the possibility of widening the targeted markets and their partnership, MMC said.

Among the possibilities for further cooperation are PSA's selling diesel engines to MMC, and the supply of gasoline engines by MMC to PSA. MMC could also build 1-tonne pickup trucks for the French car maker on an OEM basis for sale in Europe, Masuko said.

The partners did not discuss a capital alliance or cooperation in the U.S. market, he said. PSA does not sell cars in the United States.

The new SUV, based on a fresh platform, will also be sold under MMC's own badge, first going on sale in Japan at the end of this year.

The maker of the Pajero SUV aims to sell 17,000 units a year in Japan, 50,000 in the United States, 30,000 in Europe and 16,000 in other markets. The vehicle will be rolled out in the United States in 2006 and Europe in the following year, it said.

In Europe, MMC will mainly procure diesel engines for the SUV from Volkswagen AG, but may seek some supply from PSA.

"We will talk about volumes later," Masuko said.


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hm... european and recalls?? hehehe come on.. i tot they are better than dat
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