The engine, to be built at the companies' joint factory in the French town of Douvrin, near the Belgian border, will power Peugeot's future luxury sedan, as yet unnamed, which is poised to replace the 605 model early next year. It will also equip Renault's future luxury coupe, the Avantime, due to go on sale by the end of 2000.
The venture will be the latest of many between the two carmakers. Renault and PSA already build 1,000-cc engines and automatic gearboxes together -- a collaboration that Renault has said isn't at risk even after its recent purchase of a 37 percent stake in Nissan Motor Corp. Renault unveiled plans this spring to supply PSA with Brazilian-made engines from 2001.
The total cost of the Douvrin project will reach 484 million French francs ($76 million), the companies said, including 80 million francs' worth of machinery. The V-6 engine currently built in Douvrin, by contrast, cost about 2.5 billion francs to develop, half of it in the form of machinery.
The new engine will comply with Europe's new ``Euro 3'' pollution regulations, which are set to take effect on Jan. 1. Renault and Peugeot said they expect to make 300 of the engines a day when production begins.