Suzuki Motor and Volkswagen will start work on joint projects from around 10 January, after the year-end holidays, Suzuki chief executive Osamu Suzuki said on Wednesday as the automaker launched a new Alto minicar in Japan.

His firm and Volkswagen last week announced a comprehensive tie-up that will see Europe's top automaker take 19.9% of Suzuki.

"We generally understand what we want from each other, through information exchanged up to now," CEO Suzuki told reporters at the event in Tokyo.

"Actual, detailed execution - with our people going there and their people coming here - will be after January," he added, according to Reuters.

Suzuki said the new partners have agreed they want to develop a competitive, small car, seen as key to taking the lead in developing countries. He declined to elaborate.

Citing a top official at Suzuki's Indian unit, Maruti Suzuki India, local newspaper Economic Times said last week Volkswagen and Suzuki may develop a small car that would cost INR200,000 to INR250,000 (US$4,300-$5,400).

Clarifying his comments, Maruti chairman RC Bhargava said the parent company, not Maruti Suzuki, was speaking directly with Volkswagen.

"What I have said is, one of the possibilities is that Volkswagen could outsource a small car from us," he told Reuters.

Analysts said joint development of a small, low-cost car would be mutually beneficial, giving Volkswagen the coveted know-how of profitably making tiny cars and Suzuki the economies of scale to be more cost-competitive.

"Working together in the ultra-small segment will probably reap the biggest benefit for both companies," said Fumikazu Kitagawa, managing director at Nomura Research Institute.

"With small cars, you can't go in half-heartedly. But hardly anyone dares because it's so difficult to make money."

Suzuki Motor has long been the top maker of 660cc minivehicles, a segment that exists only in Japan and gets preferential tax treatment. While the engine size is not optimum to get the best fuel economy, decades of experience in microcars has helped Suzuki build up expertise in developing cheap but reliable cars.

The first Alto model, launched in 1979, was CEO Suzuki's first major project at the helm. Costing just JPY470,000 yen ($5,250), it became an instant hit, and cumulative sales in its 30th year hit 10m units this year.

"The Alto, for me, was the trigger for Suzuki to enter the auto-making industry," Suzuki said. "I think we will add another 10m units at a faster pace."

Suzuki aims to sell an average 7,000 units a month of the seventh-generation Alto in Japan. The model starts at JPY677,250 yen ($7,561) for the commercial van, and JPY732,900 yen ($8,183) for the passenger car model.

The Japanese model differs in detail, and is more highly specified than the version Maruti has already launched in domestic and export markets, as well as an OEM version for Nissan called the Pixo. Japanese market cars have wind-down rear windows rather than the pop-out glass used on the Indian-made versions. Japanese buyers get a CVT automatic transmission.

Suzuki said, however, he did not expect the 660cc segment to grow in Japan next year, estimating the market in 2009 to end around 1.68m units, down about 10% from last year.