This is a 12-week randomized, double-blind, multi-center, active-controlled (open-label pioglitazone) and placebo-controlled study of tesaglitazar (0.1, 0.5, 1, 2, and 3 mg) in patients with type 2 diabetes, not adequately controlled on diet and lifestyle advice alone during the run-in period. The study comprises a 2-week enrollment period, 4 week placebo single blind run in period followed by a 12-week double blind treatment period and a 3-week follow-up period