Toyota, Subaru to co-develop sports car

TOKYO, Aug 10, 2007; Chang-Ran Kim writing for Reuters reported that Toyota Motor Corp. and Subaru-maker Fuji Heavy Industries Ltd. are finalizing plans to co-develop a sports car under the Toyota brand as part of their recently formed alliance, the Asahi newspaper reported on Friday.

The new car, to be priced under 2 million yen ($16,900) with an engine displacement of less than 2 litres, may use Subaru's signature symmetrical all-wheel-drive powertrain, the paper said, without citing sources.

The partners aim to sell the car in 2010, and finalise details of the joint development by autumn.

Both companies said they could not discuss future product plans.

Toyota, the world's biggest automaker, took an 8.7 percent stake in Fuji Heavy in late 2005, aiming to tap the latter's unused production capacity in the United States and find areas of joint development.

Industry watchers had been especially keen to see whether Toyota would make use of Fuji Heavy's flat-four engine, a trademark technology found only in Subaru and Porsche cars.

Executives at both companies have been cagey about the possibility but have indicated that doing so made little sense since it could dilute Subaru's niche brand.

Toyota ended production of its last sports car, the MR-S, last month due to weak sales.

The Asahi also said Toyota's minivehicle unit, Daihatsu Motor Co. would supply Fuji Heavy with its Coo compact car, sold as the bB under the Toyota badge, under an original equipment manufacturing (OEM) deal. Subaru would sell the car as early as next summer, aiming for sales of about 6,000 units a year in Japan.

A Daihatsu spokesman said no such decision had been made.

Fuji Heavy, the maker of the Legacy, Impreza and other all-wheel-drive cars, has seen its sales slide as demand shifts to smaller, fuel-efficient cars in many markets.

Daihatsu and Fuji Heavy already have an OEM deal in Europe, where Subaru will begin selling Daihatsu's Boon model as its own under the name Justy this autumn, thereby saving money to fully develop its own compact car.

Toyota also has a capital tie-up with truck maker Isuzu Motors Ltd. (7202.T: Quote, Profile, Research) to cooperate in the development of low-emission diesel and other engines.

Editing for Reuters by Sophie Hardach