Ground was broken yesterday on the site of the new Toyota Peugeot Citroen Automobile Czech (TPCA) plant at Kolin, on the Elbe river 60 kilometres (40 miles) east of Prague in the Czech Republic, writes deputy editor Graeme Roberts.

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The cars will use either a three-cylinder, one-litre petrol engine built at Toyota's new $16 million engine and transmission plant in Poland or a 1.4-litre diesel supplied by a yet to be decided French PSA plant. A PSA insider told just-auto the engine would be the latest generation of the new HDi diesel developed with Ford and launched recently in the Peugeot 206 and 307 and Ford's Fiesta.

However, Czech Prime Minister Milos Zeman made it clear he wants an engine plant as well.

At yesterday's ceremony, attended by PSA Group president Jean-Martin Folz and Toyota Motor Corporation president Fujio Cho, he pointedly referred to Volkswagen's recent investment in an engine plant near the Skoda factory. But he won't get one at Kolin: Folz responded that today's economical engine plant builds one to two million units a year, way below Kolin's initial offtake of 300,000 engines.

What PM Zeman will get, of course, will be a brand-new plant employing 3,000 in three shifts and 10,000 indirect new jobs. Employment starts next year, with some training in Japan, with production due by the end of 2005.p>

Ironically, the Kolin region lost out to Leipzig in eastern Germany after being short-listed by BMW for its 1-series plant.

Folz said Kolin was chosen due to its central location in the 'Europe of the future', central to major markets, as well as its 'industry-capable infrastructure' including metallurgy skills, a good technical education system and excellent transport networks (which include a river port). The plant will produce eight body variations on a single platform.

Suppliers will be encouraged to set up just-in-time plants nearby with tyres and seats delivered direct to the line while other parts are fed in through a production control area.

The ground-breaking ceremony came just nine months after Toyota and PSA signed in Brussels an agreement to develop and produce a new entry-level car for European markets.

Folz said the deal arose after he and Cho in early 2000 found many similarities in their views of how to tackle a segment vacated as previous incumbents, like Ford's Fiesta, moved up in size, equipment and price.

The goal the two companies set last year after a joint feasibility study was to share as much of the development costs as possible yet produce three distinct versions that are simple yet attractive, innovative yet safe, small yet roomy enough for four European adults and suitable for urban use yet comfortable on the highway.

Marketing studies showed a potential 1.2 million annual market in 22 countries by 2005.

Broadly, Toyota is handling the development and 'productionising' while PSA sorts out the purchasing arrangements for parts and supplies but Folz said there is considerable overlap and idea exchange for every aspect of the project. Development costs are being shared 50-50 while investment expenses are being shared two-thirds PSA and one-third Toyota.