"We will have a decision as a company within the next 12 months. That doesn't mean we will start producing (in Europe) within the next 12 months, but we will have a decision," he told Reuters in an interview.

Ford owns 33.4 per cent of Mazda, Japan's fifth-largest automaker. Speaking during a visit to Bangkok for a product launch, Fields said: "Our relationship with Ford gives us strategic options."

"One of the things we are studying right now is potentialproduction in Europe. The driving force isn't that it is cheaper to produce there (in Europe) than in Japan. More importantly it would provide us with a currency hedge and therefore minimise the currency fluctuations on a year-to-year basis." Costs in Europe and Japan were "about the same", he said.

Fields said Mazda's results had been hit inthe last year byits performance in Europe, which had seen lower than expected growth because the strength of the Japanese yen had eroded its products' price competitiveness. "The main driver here is, how do we get stability from external factors?" he said.

Hopes to leverage off ford links
Fields said Mazda hopes to leverage off its close links with Ford to increase efficiency and improve profitability. The two companies had started combining forces in areas such as distribution where operations could cooperate without risking either company's special identity.

Mazda is already producing some cars outside Japan. The US version of its 626 model is made at a factory in Michigan and output of cars started in January in Thailand. Fields declined to give details of Mazda's possible Europeanproduction plans, but analysts have speculated that Mazda could make use of some of Ford's excess capacity in the region.