Toyota to boost stake in Subaru to 20%

TOKYO (Reuters) – Toyota Motor Corp (7203.T) will raise its stake in Subaru Corp (7270.T) to 20% from around 17%, the two Japanese automakers said on Friday as they leverage their scale to better compete in developing new technologies.

FILE PHOTO: The Subaru logo is displayed at the North American International Auto Show in Detroit, Michigan, U.S., January 14, 2019. REUTERS/Brendan McDermid

The investment comes a month after Toyota and another smaller Japanese automaker, Suzuki Motor Corp (7269.T), said they would take small equity stakes in each other.

Such tie-ups highlight how automakers are scrambling to chase scale, manage costs and boost development.

“Our companies …want to pursue the possibilities of making ever-better cars suitable for the CASE (connected, autonomous, shared, and electric) era by bringing together our strengths,” Toyota President Akin Toyota said in a statement.

Traditional car makers, especially smaller ones such Subaru and Suzuki, are struggling to meet the fast pace of change in an industry being transformed by the rise of electric vehicles, ride hailing and autonomous driving.

In a statement, Toyota said its investment would amount to up to 80 billion yen ($650 million) based on Subaru stock market value. Subaru will to reciprocate with a stake in Toyota of equal value.

“The plan appears to be to ultimately make Subaru a fully owned subsidiary, to help create a ‘mega Toyota’. This is the first step towards that,” said Takes Mikado, managing director of consultancy Panorama. “It’s all about building scale.”

JOINING FORCES

Subaru is strong in sport-utility vehicles (SUV) and all-wheel-drive technology. The two automakers in June said they planned to jointly develop an electric sport-utility vehicle on a platform produced together, to share costs.

Car markers around the world are joining forces to slash development and manufacturing costs of new technology. Ford Motor Co (F.N) and Volkswagen (VOWG_p.DE) have said they will spend billions of dollars to jointly develop electric and self-driving vehicles.

Toyota seems to be keen on investing in smaller, domestic automakers, rather than forging cross-border tie-ups like some of its rivals.

It has been building its holding in Subaru since first acquiring a 9.5% stake in the company, then called Fuji Heavy Industries, in 2005. Its current 17% stake makes Toyota the biggest shareholder.

Toyota shares ended 0.8% lower on Friday, while Subaru stock slipped by roughly the same amount.

Reporting by Maki Shiraki and Naomi Tajitsu; additional reporting by Chris Gallagher; writing by David Dolan; editing by Christopher Cushing and Jason Neely

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source: reuters.com