DaimlerChrysler will pay Mitsubishi Motors Corporation (MMC) around US$300m (35 billion yen) in compensation for ceasing production of the Smart Forfour at MMC's NedCar plant in the Netherlands, according to Reuters.

The figures are not concrete and the companies are in the final stages of negotiation. The news first appeared in the Nihon Keizai newspaper on Wednesday.

DaimlerChrysler has put aside a billion euros to cover the reorganization of the smart business unit.

The newspaper said that Mitsubishi would use the cash to cut around 1,000 jobs at the Dutch NedCar plant, equivalent to about one-third of the work force.

The companies have already agreed that DaimlerChrysler will buy out MMC's 50% stake in a German plant that makes engines for Smart and Mitsubishi cars.

Yesterday, MMC announced that it would develop a 2.0 litre diesel engine with Mitsubishi Heavy Industries. Currently its buys 2.0 litre diesels from DaimlerChrysler.

The Nihon Keizai also reported that Mitsubishi was developing a new 1.0 litre car for Europe. The car could be based on the Mitsubishi 660cc 'i' car, that is sold in Japan. Mitsubishi did not confirm the report.

See also: JAPAN: MMC announces development of new generation diesel engine