Cadillac is considering building a mid-sized car in Europe to compete in the heart of the market against its German competitors, a company official told the Reuters news agency.

Cadillac's director of global brand development John Howell told Reuters the model would be smaller than the CTS sedan, and about the same size as the BMW 3 series and the Mercedes C class.

"We need to be competitive with the lower end of our main competitors, but we don't want to go down into the compact and subcompact classes," Howell told Reuters, adding: "We might be willing to do a vehicle, an entry-luxury vehicle."

Howell reportedly added that the new model, part of Cadillac's renewed expansion into Europe, the world's largest market for luxury brand vehicles, could arrive in two to three years.

Howell told Reuters that one factor for building in Europe is a 10% duty on vehicles imported from the United States, and Cadillac also could take advantage of Europe's trade agreements to export to other countries, including back to the United States.

Reuters noted that Cadillac sells the American-made CTS and larger Seville sedans in Europe but Europeans complained that the Seville, launched in 1998, was too large for the roads, and tuned for a soft ride on America's rough highways. GM stopped selling a right-hand-drive version of the Seville in Britain several years ago, the report added.

"The Seville was an American car designed for the American market," Bruce Harrison, a consultant with the Automotive Group of automotive advisors Global Insight, told Reuters.

Cadillac spokesman Kerry Christopher told Reuters Cadillac sold just 107 Sevilles in Europe to the end of June this year.

The news agency added that the CTS, which went on sale last year, was partially engineered in Germany and has received positive reviews in Europe but its continental sales to the end of June totalled just 284.

Reuters said Cadillac's limited model line and low profile in Europe has also been a hurdle to sales because the US cars are grouped with mainstream Opel vehicles at selected dealerships across Europe and are often forgotten at the back.

But the news agency noted that, in late June, Cadillac appointed the Dutch car dealership group Kroymans Corp. B.V. to spearhead an effort to build 25 "Cadillac Experience Centres" in major cities across Europe and expects the new, large dealerships will raise its recognition across the continent.

Reuters said Cadillac will also expand the model line with the SRX mid-sized SUV and the XLR roadster next year, followed by the next-generation Seville, to be called the STS, in late 2004 or early 2005, while Chevrolet's Corvette sports car will also be included at the new Cadillac dealerships.

Howell told the news agency the strengthening euro had made importing some of those vehicles from the United States more attractive: "We've definitely swung from a marginal business case situation to a very profitable business case."

Howell told Reuters Europeans have also complained that Cadillac's big V8 engines drink too much petrol but the CTS and the SRX both have six cylinder engines, and a four cylinder could be in a future vehicle. Cadillac will also add diesel engines, which are in more than 40% of new cars in Europe, in three to five years, he reportedly said.

Without giving specifics, Howell told Reuters that Cadillac sales are expected to grow to more than a few thousand a year with the additional vehicles.

"It's not the kind of thing where we're going to do a couple thousand, which has been our history," he reportedly said.