Ford Motor Co (F.N) started production at its Romanian plant in the southwestern city of Craiova on Tuesday, seeking to sell its Transit Connect van in Romania and eastern European markets, officials said.

The plant, bought by the U.S.-based carmaker in 2008 for 57 million euros ($82 million), will start output at low levels, company officials said, responding to a drastic fall in demand due to the economic slowdown.

We will increase production next year, we're not sure exactly (to what level), we have to remember the commercial market across Europe for the moment is about 50 percent down, head of Ford Europe John Fleming told reporters.

Ford has said it plans to invest 675 million euros in the plant, which produced 24,000 Daewoo vehicles in 2006.

It intends to raise employment to around 7,000 from 3,900 and plans to reach output of 300,000 units a year at full capacity, compared with some 2,000 this year.

Many auto-part makers have set up shop in Romania in recent years, lured by cheap labour, a flat 16 percent tax on profits and the presence of Renault's (RENA.PA) Dacia plant. Ford is expending operations here with the help of 400 million euros from the European Investment bank.

Fleming also confirmed the light commercial vehicle Transit Connect which is now being produced at the Craiova plant will be followed by a small car, which would not be the Fiesta or Ka. (Reporting by Radu Marinas; Editing by David Holmes) ($1=.6950 Euro)

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