Peugeot, Mitsubishi Sign Kaluga Deal

French carmaker PSA Peugeot Citroen said Monday that it has signed an agreement with Mitsubishi Motors, one of Japan's biggest automakers, to set up a factory in Russia.

The joint venture will make midsized sport utility vehicles under the Citroen, Peugeot and Mitsubishi brands and midsized cars for Peugeot and Citroen at a factory in Kaluga.

Chief executive Christian Streiff told reporters in Paris that Peugeot Citroen will invest 300 million to 350 million euros ($460 to $540 million) for a 70 percent share in the project, which the French carmaker will manage.

Peugeot Citroen is convinced that Russia will "very quickly become the biggest market in Europe," he told a news conference. Peugeot Citroen said midsized vehicles account for half of the Russian market.

Production on the new Kaluga site is scheduled to start in 2011 for a capacity of 160,000 vehicles, the carmaker said. Of those, 110,000 will be midsized vehicles, and 50,000 will be sports utility vehicles, Streiff said.

The new factory will provide 3,000 jobs, said Didier Aleton, who will manage the factory for Peugeot Citroen.

Eventually, the Kaluga site could produce up to 300,000 vehicles, Streiff said, without giving a timeframe.

The French carmaker has said it aims to sell 100,000 Peugeot and Citroen brand vehicles in Russia in 2010. In 2007, Peugeot Citroen said vehicle registrations grew by one-third in Russia to 36,000.

n Ford plans to boost production at its Russian plant to around 125,000 cars per year in 2009 and is looking to build another plant there, Jim Tetreault, the carmaker's head of manufacturing for Europe, said.