Ford's new Ka goes on sale in January replacing the original which was launched in 1996. 2008 Ford Ka

To keep costs down, Ka has been developed jointly with Fiat and is based on the 500/Panda platform.

"Fiat was a natural partner for us because of their small car expertise," explains Tony Dixon, Ford's Ka project and business manager, adding that the small car business is a difficult one to make money in.

Ford has gone to some lengths to differentiate the Ka from the 500, says Dixon.

The suspension and steering have both been modified and Ford has fitted a rear anti-roll bar which improves stability.

Dixon adds that everything a customer sees, hears or feels on the new Ka is Ford and this has extended to tuning the engine software to give both the 1.2 litre petrol unit and 1.3 litre diesel slightly different characteristics to the Fiat versions.

The importance of the Ka is stressed by Ford of Britain chairman Roelant de Waard. The sub-B segment in which it competes is today worth about 8% of total sales, up from 4.3% in 2003.

When it was launched 12 years ago, Ka had only eight competitors - today it has 21.

Throughout all that it has been segment leader taking 20% of all sales.

De Waard forecast sales in 2009 will be around 25,000, about 10% down on current Ka and in line with the general 10% decline in the market which he expects to continue throughout next year.

A diesel joins the line-up for the first time and although that is a bit of an unknown quantity, De Waard expects it to take about 4% of sales.

There will also be a low-emission Econetic version; final specification, including which engine will be used, has not been finalised nor will the company put a date on when it will arrive.

"We could use a Fiat engine but there's nothing stopping us using one of our engines," said Dixon.

Prices for the Ka start at £7,995 for the Studio model but De Waard expects more than half of all buyers to go for the top Zetec version from £9,495 while the diesel, only available in Zetec trim, costs £10,195.

To read AM’s road test of the new Ford Ka see AM’s November 28 issue.