Subaru maker Fuji Heavy Industries Ltd. and Saab will co-develop a new high-end crossover vehicle for the US market in their second joint vehicle project, the companies reportedly said.

The project marks an expansion of the two GM group companies' cooperation initiated last year, and follows the launch this month of the Saab 9-2X sports compact, which is built by Subaru based on its Impreza WRX model, Reuters said.

"This collaboration provides many benefits such as economies of scale (and) higher joint volume for Fuji Heavy's US manufacturing facility," Fuji Heavy president Kyoji Takenaka said in a statement cited by the news agency.

Reuters said the vehicles will be designed separately by Subaru and Saab but will share the symmetrical all-wheel-drive platform that Subaru is best known for and both will be built at Subaru's factory in Indiana in the United States.

Subaru's version, to be priced around $US40,000, is scheduled to go on sale first, around the middle of next year, the report said.

Subaru, held one-fifth by General Motors, is banking on the vehicle, dubbed "XUV", to expand sales and profit margins in its key US market, Reuters noted.

With the model's annual sales target at 30,000 to 40,000 units, Subaru reportedly is aiming to lift its US market share from 1.1% now to 1.5% by the end of its current business plan in 2006, boosting total sales there to 250,000 units.

Reuters noted that Subaru enjoys a big presence in the snowy northeast and northwestern rural regions of the United States, but has struggled in major cities and in the sun-belt areas of the south. To jump-start its flagging car-making business, Fuji Heavy has been trying to craft an image as a premium brand like BMW and Volvo, veering away from the reputation of offering cheap but high-value cars.

"We're holding test-drive events in 10 major US cities for customers and journalists, asking them to compare our cars with other premium cars like BMWs and Volvos," Kunio Ishigami, the new CEO of Subaru's US unit, told Reuters.

Ishigami reportedly added that Subaru also plans to renovate over 100 of its 585 US showrooms by 2006 to give the brand more recognition, while converting more dealerships into exclusive sellers of Subaru cars.