Honda will start supplying General Motors with low-emission engines and automatic transmissions next year, as the US company tries to minimise the cost of making cleaner cars, Bloomberg News reported.

The news agency said the two companies first agreed on the co-operation in 2000.

Citing Honda president Hiroyuki Yoshino, Bloomberg said Honda would supply about 50,000 V6 engines and transmissions to GM a year, less than the initially planned 90,000.

Bloomberg News added that investors have said Honda was set to post its second year of record earnings this business year.

Honda, expecting record sales in all its product ranges in 2003, may expand its business by selling engines to other car makers, Bloomberg News added.

"This is a win-win relationship, which helps Honda increase business and it may be cheaper for GM," said Norihiko Kamada, who helps manage $US1.2 billion, including motor industry shares, at Chuo Mitsui Asset Management Co., told Bloomberg News.

Yoshino told Bloomberg News that Honda would assemble the transmissions and three-litre to 3.5-litre engines at its Ohio plant. General Motors would use them in one of its Saturn models, the news agency added.

Bloomberg News said Honda's engines would help General Motors meet Californian regulations requiring major vehicle makers to sell a certain percentage of vehicles with low-emission engines.

Meanwhile, Honda told Bloomberg News that General Motors affiliate Isuzu Motor has started shipping 1.7-litre diesel engines to Honda for the three- and five-door Civic compact models built and sold in Europe.

The contract will run until October 2005 and Honda plans to sell 15,000 diesel Civics a year, the company said, according to Bloomberg News.