Up until now Subaru has never produced a diesel engine, and didn't have the resources to develop both diesel and hybrid drive-trains. This all changed a year ago when General Motors sold the Subaru stake they bought in 1999 to Toyota. General Motors was having financial problems and needed to offload most of their overseas affiliates that weren't contributing to the bottom line. This proved to be a boon to Subaru as they suddenly had access to Toyota's industry leading Hybrid Synergy drive technology. As a result they could focus their resources on developing a diesel engine in the familiar boxer layout.
Subaru expects to have their first diesel engine on the market in Europe by the end of 2007 and they anticipate half of their projected 100,000 European sales to be diesels by the 2010 model year. Chief Executive Kyoji Takenaka projected that diesels would eventually be 10-20 percent of sales in the US and Japanese markets as well. At some point after the diesels are introduced, Subaru also expects to introduce a hybrid power-train based on Toyota technology although nothing is confirmed right now.