Toyota, Isuzu Announce Tie-up, Focus on Emissions
Date: 08-Nov-06
Country: JAPAN
Author: Chang-Ran Kim, Asia auto correspondent
Auto makers around the world are racing to come up with advanced technology to meet ever tighter standards for emissions and fuel economy, with many forming operational alliances to sharpen their competitive edge.
The latest move marks Toyota's second capital link-up with a Japanese auto maker in 13 months after it took 8.7 percent of Fuji Heavy Industries Ltd., the maker of Subaru cars, in October last year.
Both Fuji Heavy and Isuzu, a 69-year-old truck maker valued at US$4.0 billion, were formerly affiliated with US auto giant General Motors Corp., which had dissolved those ties to raise much-needed cash.
Toyota, the world's second-biggest auto maker after GM, will buy 60 million shares in Isuzu from Mitsubishi Corp. and 40 million from Itochu Corp. The purchases are scheduled for Nov. 10.
At Isuzu's closing share price of 415 yen on Tuesday, the 100 million shares would be worth about US$352 million at current exchange rates.
Mitsubishi said its stake in Isuzu will fall to 9.2 percent if all preferred shares purchased by Toyota are converted. Itochu's stake would be reduced to 7.7 percent.
The tie-up will focus on development and production of small diesel engines, joint development of emission-reducing technology for diesel engines and other powertrain-related technologies, they said in a statement.
Toyota President Katsuaki Watanabe and Isuzu President Yoshinori Ida are scheduled to hold a news conference at 7 p.m. (1000 GMT).
While Toyota leads the industry in most environmentally friendly technology -- notably in gasoline-electric hybrids -- it is a laggard in diesels, which are gaining traction around the world as a proven technology for reducing fuel consumption.
Isuzu, meanwhile, is known for its edge in diesels, supplying small engines to GM and Renault SA, and until recently also to Honda Motor Co.
Analysts cheered the tie-up.
"It's positive for both sides," said UBS Securities auto analyst Tatsuo Yoshida, noting the ties could hasten Toyota's efforts in improving its diesel technology while enabling Isuzu to tap its partner's experience with other advanced technology.
"It's especially good for Isuzu -- being under Toyota's umbrella will help as it tries to expand in emerging markets," Yoshida added.
Before the news, shares in Tokyo-based Isuzu ended down 1.19 percent at 415 yen, while Toyota ended up 1 percent at 7,100 yen.
The transport subindex ITEQP.closed 0.9 percent higher.
(Additional reporting by Yuko Inoue)
