Ford said it would start production of a new small car next year at the Romanian plant and will press ahead with its planned EUR675m (US$880m) investment in Craiova, west of the capital Bucharest.

Executive vice-president for global manufacturing, John Fleming, told reporters that production of the new model would start towards the end of next year.

He added: “The vehicle that we will launch next year will be a small car. It will not be a vehicle that we have in the portfolio at the moment.”

Fleming said the plant would produce approximately 150,000 units a year but refused to give more details about the vehicle for "competitive reasons".

He acknowledged that Ford was behind schedule with its plans for the former Daewoo plant which the US company acquired in 2008. The company had intended to produce up to 250,000 cars by the end of 2011, according to an agreement with the Romanian government.

Fleming said: “"We are late but we will get all of the capacity installed. We will be able to produce 300,000 vehicles by 2013."

He added that Ford also plans to produce a high-tech, fuel efficient engine in Romania.

The automaker plans to hire around 3,500 people in the next two years, alongside a similar number of employees it took over from Daewoo.