In further co-operation between the French and Italian automakers, Peugeot will begin building 140,000 gearboxes a year in Fiat's factory in Cordoba, Argentina, for cars sold in South America, the companies said on Thursday.

The announcement came on the day the two firms unveiled a new large van line (and a new paint shop facility) at their Sevel (Società Europea Veicoli Leggeri) plant in Val di Sangro, Italy. That co-operation, begun in 1978 has since resulted in a second JV for smaller vans in France and a three-way project, including local automaker Tofas, to make another line of commercial vehicles in Turkey from 2008.

Peugeot is trying to increase the proportion of parts built in South America to reduce its exchange- rate risk and end losses in the region.

After years of slow activity in Argentina, Fiat in mid-2005 said it would invest about $US150 million in its components plant in Córdoba city that mainly supplies vehicle production in Brazil.

The money would be used to boost engine volume and to restart local transmission production ended in 1997. Like Peugeot, the automaker said at the time it planned to use more locally-made parts in its engines and transmissions.

But there were no plans for Fiat to restart vehicle production in Argentina. The company closed its car plant there in 2001 to concentrate Latin American production at its Betim factory in Brazil.