Ford plans its smallest engine ever

Ford Motor Co is developing its smallest engine ever as part of its push to wring out greater fuel savings as gasoline prices rise and federal standards on fuel economy grow stricter.

The No. 2 U.S. automaker will introduce a 1.0-liter three-cylinder engine within the next two years. The engine will have the same performance as the widely used four-cylinder engine, but would save more fuel and lower emissions, Ford said.

We just keep trying to find fuel economy improvements, Derrick Kuzak, Ford's head of product development, said on Thursday. The only way you keep doing that is by finding new technologies and attention to detail.

Engines of this size are seen in smaller cars and motorcycles. At an event at Ford's product development center, Kuzak said the engine is clearly aimed for small cars.

Ford also said on Thursday it would develop its own hybrid transmission, replacing one currently made by Japanese supplier Aisin. Ford is also planning an eight-speed transmission.

The move comes as automakers are developing more advanced powertrains and shaving weight from their vehicles to meet tightening federal standards regarding fuel economy.

By the 2016 model year, automakers' cars and trucks must get 35.5 miles per gallon on average, according to new federal fuel economy standards. Vehicles made by the top 14 automakers for the 2010 model year averaged 22.5 miles per gallon.

The three-cylinder engine would have EcoBoost technology, which includes turbocharging and direct injection. Kuzak called EcoBoost the centerpiece of Ford's fuel economy efforts.

Small engineering changes are helpful, Ford executives said. For example, the engine has an offset crankshaft that can boost fuel economy between 1 and 2 percent.

It's a very subtle detail, but it's an important detail if you want to get to the absolute lowest fuel consumption possible with this engine, said Joe Bakaj, Ford vice president of global powertrain engineering.

The three-cylinder engine will be used in Ford vehicles worldwide, including the United States, but Ford did not specify which models.

The engine will be built at more than one plant, but Ford declined to say which of its plants worldwide could build it.

The hybrid transmission will be built at Ford's Van Dyke transmission plant in Detroit. Production starts late this year and full output is slated to start in early 2012.

The eight-speed transmission will also be built in the United States, but Ford did not specify where.

(Reporting by Deepa Seetharaman, editing by Matthew Lewis)