Toyota Motor on Friday said it was talking with Japanese partner and truck maker Isuzu on developing diesel engines, but no details had been decided.

The Nikkei, Japan’s top business daily, reported in its Friday’s editions that Toyota will outsource diesel engine production to Isuzu Motors, which has a reputation for top diesel technology, The Associated Press (AP) said.

According to the report, Isuzu will set up a plant in northern Japan for low-emission diesel engines and produce 200,000 a year for Toyota small cars for export to Europe.

Toyota currently builds its Yaris subcompact (B-segment) in northern France and its A-segment Aygo in a Czech Republic joint venture plant with PSA Peugeot-Citroen, which also shared the model’s design and production.

AP noted that demand for diesel vehicles is growing especially in Europe because of worries about global warming. But it added that, though Toyota already produces diesel engines in Europe, it has tended to focus on hybrids.

Isuzu said in a statement cited by the Associated Press that it was in talks with Toyota on “all areas, including development and production” but nothing had been decided.

According to the news agency, Toyota said in a statement it was discussing possible diesel engine development with Isuzu but nothing had been decided.

The Nikkei said Toyota has decided it needs help from Isuzu to continue to compete in diesel technology with rivals, such as Honda, which is strengthening its diesel line-up, AP added.

By collaborating with Isuzu, Toyota can hope to save development costs for ‘green’ diesel engines, the Nikkei reportedly said.

AP noted that Toyota owns a 5.9% stake in Isuzu which formed a capital alliance with Toyota in November after dissolving its tie-up with General Motors in April 2006.