AN electric vehicle manufacturer is poised to land a partnership deal that could lead to mainstream vehicle production.

Smiths Electric Vehicles (SEV), near Stanley, County Durham, yesterday confirmed it was in talks with a company described as "a household name", but would not identify which company it was.

Roy Stanley, chief executive of SEV's parent company, the Tanfield Group, said: "We are working on developing strategic relationships with some significant players."

SEV has won a number of contracts this year based on a high performance model, due to be launched next month.

These included its first fleet contracts for airport baggage handling vehicles in February, supplying John Lennon Airport, in Liverpool, and Air Canada.

The Tanfield Group yesterday posted pre-tax losses of £5.97m for the year ending December, down from £6.99m in 2003.

Part of this was attributed to a restructuring of the business.

Mr Stanley believes the company is about to have a record year.

He said: "We made some decisions early last year about what we were going to do with the business and have stuck to our game plan.

"We always knew part of that would be writing off a significant amount of plant equipment.

"All the institutional investors are very happy and understand what we are trying to do."

Turnover rose 312 per cent to £11.76m, largely boosted by the acquisition of engineering company Tanfield Holdings at the end of 2003 and SEV last October.

Both have record order books and the group has been trading profitably since the last quarter of last year.

The pay roll has risen from 160 staff in March last year, to 395.

The group is also pursuing three more acquisitions, including another specialist vehicle manufacturer.

Mr Stanley has moved SEV from Gateshead to the Tanfield Lea Industrial Estate near Stanley, to bring it closer to Tanfield Holdings.

He is applying for funding to explore joint projects between the two companies.

The group bought Tanfield Holdings at the end of 2003. Last September, it switched from being a sub-contractor, largely for automotive components, to more lucrative assembly and sub-assembly work.

The move has led to orders reaching a record £18m, compared to £7m at the beginning of last year.

The group's digital imaging operation, e-comeleon, has pulled out of manufacturing and left its Comeleon House headquarters on the Tanfield Lea Industrial Estate.