The Diesels are coming the diesels are coming! Peugeot, Ford Roll Out New Diesel Engines

PARIS February 18, 2003; Dow Jones reported that French automaker PSA Peugeot Citroen and Ford Motor Co. of the U.S. Tuesday unveiled new diesel car engines that the companies have developed jointly to take advantage of surging consumer demand.

Both companies are investing nearly EUR1 billion in the project to make 1.6- liter and 2-liter engines that are lighter, cleaner and quieter than existing ones.

Already, more than 40% of the cars sold in Europe are powered by diesel engines - in France the proportion is closer to 60% - compared with less than 17% 10 years ago. Moreover, car executives are confident that by 2006, half of the cars on the roads in western Europe will use diesel.

Derrick Kuzak, vice-president for product development at Ford in Europe said there's a vast potential U.S. market for diesel-engine cars, and that Ford is studying applications, but there are no plans currently to offer diesel-engine cars there.

U.S. consumers have traditionally expressed little interest in diesel engines, partly because gasoline is so cheap; in Europe, diesel fuel is usually substantially cheaper than gasoline, chiefly for tax reasons.

Diesel engines have tended to suffer from an image problem of being dirty, noisy and smelly.

But that's no longer the case with new generations of high technology engines. And thanks to advanced technology and electronics, they can rival gasoline engines in terms of power, size, cleanliness and quietness. Moreover, there's no contest when it comes to fuel consumption.

U.S. car manufacturers, for their part, have shied away from offering diesel- powered models. Indeed, Germany's Volkswagen is the only car maker to offer U.S. car buyers a diesel option, although Ford, General Motors (GM) and Dodge offer diesel-driven pickup trucks.

Probably a bigger problem is simply the availability of good-quality diesel fuel in the U.S. European diesel engines are made to run on diesel with a much lower sulfur content than is sold in the U.S.

And many neighborhood gas stations simply don't have diesel pumps; the main suppliers are found on highways, catering to the truck trade.

"There's a big logistics problem to be solved before the diesel market will take off in the U.S.," said Morgan Stanley analyst Adam Jonas.

Officials from both Ford and Peugeot declined to say which models will be equipped in Europe with the new common rail engines. Nor would they give a precise timetable for their introduction on the Continent, other than to say they will be phased in this year and next.

The partnership between Peugeot and Ford in developing and manufacturing diesel engines dates back to 1998. The two companies already make a 1.4-liter engine, and the latest venture that will see 1.6 million engines coming off the production lines at Peugeot's plant at Tremery, in eastern France, is the second stage of a four-part plan.

The next stages will see the joint development of a V6 2.7-liter engine, and a new family of engines for vans and light goods vehicles.

The partnership will soon become the world's leading maker of diesel engines, producing more than 12,000 units daily.

Ford and Peugeot officials hinted that the partnership is doing so well that future joint projects are possible, but wouldn't elaborate. Both companies are already reaping the benefits of the diesel engine venture in terms of economies of scale.