Toyota Motor toy will pay $311 million to raise its stake in Subaru parent Fuji Heavy Industries to 16.5%, and the two companies said Thursday that they will develop cars together.
Fuji and Toyota will develop a compact, rear-wheel drive sports car, to go on sale by the end of 2011.
Toyota, which makes the Prius gas-electric hybrid and Camry sedans, will handle the basic design, while Fuji will develop the engine, they said without giving further details. Fuji already makes the Camry at its U.S. plant.
Toyota says the step is part of its plan to revamp business alliances with Fuji and Daihatsu, a Toyota subsidiary that makes small cars. The move will also expand the scope of the joint car production among the three.
The latest agreement will strengthen an existing alliance, in which Fuji makes Toyota Camry sedans in the U.S., while Daihatsu makes the Justy compact car that Fuji sells in Europe.
Toyota will buy 61 million Fuji Heavy shares from Fuji for 31.1 billion yen ($311 million), the companies announced in a news conference at a Tokyo hotel, attended by Toyota President Katsuaki Watanabe, Fuji President Ikuo Mori and Daihatsu President Teruyuki Minoura. It currently owns an 8.7% stake in Fuji Heavy.
"The alliance with Fuji Heavy is a win-win situation," Watanabe said. "We can count on Fuji's superb engineering."
Daihatsu specializes in minicars, which are limited to an engine size of up to 660 cubic centimeters. The tiny cars are growing in popularity because of soaring gasoline prices and ecological concerns.
Toyota, Japan's No. 1 automaker, is generally cautious about partnerships with other automakers that involve stakes in each other. But it holds a 51.19% stake in Daihatsu.
Toyota also holds a 50.11% stake in truckmaker Hino Motors and a 5.9% stake in truckmaker Isuzu Motors.
Stronger alliances can be a plus for Toyota as it embarks on an aggressive strategy of global growth.
Last year Toyota — which makes the Prius gas-electric hybrids and the Camry sedan — overtook General Motors as the world's No. 1 automaker in global vehicle production, although GM still retains the top spot in global vehicle sales.
Toyota made a record 9.498 million vehicles worldwide in 2007, up 5.3% from the previous year and beating GM at 9.284 million.
But Toyota sold fewer vehicles at 9.366 million to GM's 9.370 million vehicles. GM has been the world's top seller for 77 years.