A proposal by the joint venture between Tata Motors [Get Quote] and Fiat to set up a facility to manufacture the world's most famous small diesel engine -- the 1.3 multijet -- had been rejected by Japan's largest maker of minicars, Suzuki Motor Corporation.

"We (the Tata, Fiat joint venture company, Fiat India Automobiles) looked to have one plant for the 1.3 litre diesel engine of Fiat. We had approached Suzuki for the alliance but they disagreed," said Ratan Tata, chairman of the Tata Group, while answering one of the queries posted by shareholders at the company's annual general meeting recently.

SMC, instead, through its Indian subsidiary -- Maruti [Get Quote] Suzuki India (MSIL) -- had opted to set up its own facility in Manesar near Haryana. The facility, which has a capacity to produce 300,000 units a year, now produces the engine for MSIL's Swift and Swift DZire models.

"All the three companies would have made considerable savings if a joint facility for the engine would have been brought in place," said an auto expert.

Lauded for its operational benefits, the engine is regarded as one of the most fuel efficient yet high-powered compact engines ever produced in the diesel category.

The engine is expected to be the most widely-used diesel engine in the country by next year. It is all set to be used by four manufacturers in more than seven models across two segments.

General Motors and Fiat already uses the engine in its models, while Tata Motors plans to use it in the new Indica and possibly in the Indigo as well.

The engine was a result of a technical collaboration between world's largest car making company, General Motors, and Fiat, which commenced operations more than a decade ago.

The engine was part of the settlement of a failed merger between the two auto conglomerates. Subsequently, Suzuki also acquired the license for commercial production of the engine.

The joint venture company of the Tata and Fiat -- Fiat India Automobiles -- has set up a 3,00,000-engines per year plant at Ranjangaon near Pune in Maharashtra where the 1.3 multijet will also be produced apart from some other petrol engines.

Fiat's new compact car, Grande Punto, which could be launched in the last quarter of this financial year, could be powered with the multijet engine, company officials had said.

The Italian auto giant is also mulling selling the engine produced in India to other original equipment manufacturers (OEMs) within the country or internationally.

FIAPL had recently scaled up investment in their plant to Rs 4,020 crore (Rs 40.20 billion) from Rs 1,600 crore (Rs 16 billion) planned in the earlier stages. The Ranjangaon facility will now produce 200,000 cars, 300,000 engines and 300,000 parts and accessories for both the companies. Maruti plans to pump Rs 2,500 crore (Rs 25 billion) into the Manesar plant by 2010.