Peugeot, which this month said it planned to shut the Aulnay factory near Paris, will start building commercial vans for Toyota next year at Sevelnord, another threatened facility in northern France, both automakers said on Monday.

The companies will jointly develop future van models to be assembled at Sevelnord only if the plant's unions agree to productivity improvements, Peugeot said.

"Nothing has been signed yet but we are optimistic about the negotiations," a Peugeot spokesman said.

Cooperation on the vans is expected to continue beyond 2020, the companies said. They gave no production targets.

Peugeot's European plants are struggling with excess capacity amid plunging demand for new vehicles in crisis-hit Europe. The carmaker announced 8,000 job cuts along with the Aulnay closure plan on July 12, drawing the ire of France's new Socialist government and unions.

Under the deal announced on Monday, the French automaker will initially supply Toyota with a midsize delivery van similar to its Peugeot Expert and Citroen Jumpy models. Toyota and Peugeot already build small cars together in a separate Czech joint venture.

Paris-based Peugeot currently operates the Sevelnord factory with Fiat (FIA.MI), but the Italian automaker is selling its stake to Peugeot and phasing out production of its Scudo model.

Peugeot opened union negotiations in May by asking representatives of the plant's 2,700-strong workforce to agree to a pay freeze, reduced leave, flexible hours and hundreds of possible job cuts to avert closure.

Without the concessions, the next generation of midsize vans would be moved to Peugeot's factory in Vigo, north-west Spain, unions say they were told.

Located near the city of Valenciennes, Sevelnord assembled 94,000 vans last year, of which 20,000 were for Fiat and the remainder for the Peugeot and Citroen brands.

The deal with Toyota would initially see the Japanese automaker purchasing 5,000-10,000 vans annually, according to a report last week by French weekly La Tribune.

(Reporting by Nina Sovich and Chang-Ran Kim; Writing by Laurence Frost; Editing by Erica Billingham)

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