Subaru and Toyota's collaboration hasn't taken long to bear fruit. The big Japanese carmaker stepped into the void when General Motors sold its share of Subaru's parent company Fuji Heavy Industries late last year. Now comes the news that Toyota will use Subaru's US facilities and line workers to build Camrys for the world's biggest car market.

The US market Camry (pictured) will be built at Subaru of Indiana Automotive Inc (SIA) facility in Lafayette, Indiana. SIA current produces the Subaru Legacy (know in Australia as Liberty), Outback, Baja (a Liberty-based ute, also pictured) and the Tribeca SUV on two production lines.

SIA Subaru production will be consolidated onto one line. Following modifications, the other line will introduce Toyota production technology. The Toyota Production System will be used for Camry.

Production will start in early 2007 and should reach around 100,000 units per year. This will boost SIA's output to around 240,000 units and generate approx 1000 jobs, claims FHI.

FHI and Toyota have also confirmed that Subaru will develop Toyota vehicles in the future. The collaboration will initially focus on hybrid vehicles using Toyota's existing Hybrid System.

Meantime in Europe Subaru has confirmed it is developing a diesel vesrion of its trademark boxer (horizontally-opposed) four-cylinder engine.

Expected to debut in Europe in 2007, the 2.2-litre turbodiesel powerplant will be a modual engine. A six-cylinder 3.3-litre version will likely slot into Outback and Tribeca variants down the track.

The diesel powerplant was confirmed by president and CEO of Fuji Heavy industries, Kyoji Takenaka, at the recent Geneva Motor Show.