FORD is cutting its ties with Volkswagen and forging an alliance with Peugeot and Citroen in a series of astonishing moves at the summit of European vehicle manufacture. VW is in discussions to buy out Ford's share of their 50:50 joint venture in Portugal which manufactures the Ford Galaxy, Volkswagen Sharan and Seat Alhambra.

The German car maker has set a timescale of January 1, 1999 for taking control of the Palmela plant, but will continue production of the Galaxy/Sharan/Alhambra into the millennium. Ford will manufacture its next generation MPV at one of its own plants, while VW is understood to be considering a van production line at Palmela.

Meanwhile, superminis produced by Ford, Peugeot and Citroen will drive into the new millennium with the same diesel engine under their bonnets. In a surprise deal announced at the Paris Motor Show, Ford and Citroen and Peugeot parent company PSA have decided to join forces to develop a new family of high-efficiency power units. According to PSA executives at the Paris event, the next-generation motors will be sized up to 1.5 litres - which suggests Ford could be planning to offer a sub-Fiesta size car with diesel power. The current Ka model is available only in petrol form.