Fiat Auto and Ford Europe are near a deal to build their next minicars at Fiat’s plant in Poland starting in 2008, Automotive News Europe reports.

Fiat will build 120,000 units annually of each vehicle in its Tychy assembly plant, 310km south of Warsaw. Fiat’s version will replace its Seicento minicar starting in 2008.

The Ford version will replace its Ka entry-level model starting later that year. The two companies are expected to sign the final agreement by the end of October. They signed a memorandum of understanding in late August.

Both vehicles will share a shortened version of the Fiat Panda’s platform.

The Panda also is built in Tychy. The two vehicles also will share their entire powertrain and a number of major components, but will have very different body styles.

“It won’t be the basic shape with just three different front and rear ends like the Citroen C1, Peugeot 107 and Toyota Aygo minicars,” said a source familiar with the project. “Ford will add its own body to the Fiat underpinnings.”

Ford’s version will hit the market later because Fiat already has started development of its new minicar. To keep the designs different, the two cars won’t share any body panels. Even the doors – one of the most expensive body parts – will be specific to each model. The C1, 107 and Aygo share their doors, roof and the entire greenhouse. Technically, the deal won’t be a joint venture; it will be a manufacturing contract.

Fiat has similar product-supply agreements with Suzuki and PSA/Peugeot-Citroen. Starting in early 2006, Suzuki will supply Fiat with a version of its new SUV built in Hungary. Fiat will call its version the Sedici. By 2007, Fiat’s longtime Turkish partner Turk Otomobil Fabrikasi (Tofas) will supply Citroen and Peugeot with a new light-commercial vehicle, currently dubbed the Minicargo. Fiat will make all the investments, except the parts specific to the Ka replacement, which Ford will pay for. Fiat will recover the research and development and plant tooling investments from the production fees it will charge Ford for the Ka replacements it builds.

Fiat will call its new Polish-built minicar the 500 after its famous predecessor. Between 1957 and 1977, Fiat built 3.9 million units of the 500, the icon of Italian basic transportation. The new Fiat 500 will be a three-door hatchback with four seats and an overall length of 3400mm. The design is derived from the 3+1 concept car unveiled at the 2004 Geneva motor show.

The new Ford will replace the aging Ka, built since 1997 in Valencia, Spain.

The cars will debut offering two, four-cylinder engines from Fiat: a 1.0-litre petrol unit and a 1.3-liter common-rail diesel. Fiat’s powertrain subsidiary, Fiat Powertrain Technologies, also is working on a smaller petrol engine, which the two minicars will use by 2010.

Currently under development, this new engine will be a two- or three-cylinder unit with less than 1.0 litre of capacity. Fiat expects CO2 emissions to be less than 100 grams per kilometre. By 2008, European carmakers’ average CO2 emissions in Europe should be less than 140g/km, so the small engine would help reduce the corporate average for both automakers.