Although Subaru is working with Toyota to develop hybrid technology, the automaker will introduce diesels-powered vehicles to the market first, company officials announced. Europe is slated to get diesel-powered Subarus beginning next year -- shortly after the diesels are debuted at the 2008 Geneva auto show -- but the automaker has no immediately plans to bring the engines to the U.S. It's possible the U.S. market could have to wait until 2012 to get the new diesels.

"There are many opinions. But currently, the voices calling for diesels are stronger than the voices for hybrids," Ikuo Mori, president of Subaru parent company Fuji Heavy Industries, told Automotive News Europe.

Although diesels are the automakers top priority, Subaru will continue to develop its hybrid technology with Toyota. "We agreed with Toyota to utilize the Toyota system in developing our own hybrid technology," Mori said. "Fundamentally speaking, we can't just plunk Toyot's system into our own vehicles. We need to develop something that is adjusted to our products."

Mori failed to give a time frame for when Subaru will have hybrids on the market but did say the company would wait until lithium-ion battery technology is perfected. General Motors hopes to have lithium-ion vehicles by 2010, so expect Subaru to introduce its hybrid technology after that, possibly around the same time the U.S. will get Subaru's diesel vehicles.

In addition to hybrid technology, Subaru and Toyota are also beleived to be co-developing a new sports car for the Japanese market.