Mitsubishi Motors Corp. and parent company Mitsubishi Heavy Industries say they have jointly developed a new diesel engine for European models.

The 2L engine will be installed in “key” small and midsize cars Mitsubishi will export to Europe, the auto maker says, adding when development of the engine is complete in mid-2009 it will meet Euro5 emissions standards and have best-in-class output and fuel economy.

Mitsubishi has set a target of 2010 for the start of mass production of the diesel mill.

Mitsubishi’s Pajero SUV in Europe is powered by a propriety diesel engine, but its small and midsize cars use Volkswagen AG and DaimlerChrysler AG diesels.