Toyota and Suzuki look to form alliance

Toyota Motor Corp. sees the technological revolution shaking up the auto industry as a serious enough threat to its survival that the world's most valuable carmaker will consider partnering with one of its fiercest Japanese rivals.

In exploring collaboration between Toyota and Suzuki Motor Corp., chieftains Akio Toyoda and Osamu Suzuki seek to tie together companies with a history of failed alliances. The two would overlook Toyota's short-lived partnership with Tesla Motors Inc. and Suzuki's acrimonious breakup with Volkswagen AG due to the daunting financial demands of keeping up with technological advances in areas such as electrification and autonomous driving.

"Toyota is not really good at creating alliances" and in the past was "fixated on the need to be able to cover all of our own bases," Toyoda, 60, said at a press conference Wednesday in Tokyo. "However, as the surrounding environment is changing drastically, we need to have capability to respond to changes in order to survive."

Toyoda and Suzuki, 80, said they began talking with one another last week and will slowly consider a potential capital alliance. While the two also haven't decided on specific fields for joint research and development, it's clear which company would stand to gain most in this regard. Toyota City, Japan-based Toyota has budgeted 1.07 trillion yen ($10.3 billion) this fiscal year, more than seven times Suzuki's planned R&D spending.

What Suzuki brings to the table is a leading position in India. Its Maruti Suzuki India Ltd. unit has long dominated the market with inexpensive cars like the Alto and Swift. Though Toyota has introduced budget models such as the Etios compact, its market share remains well behind the 47 percent reached by Maruti Suzuki last fiscal year.

"There are great changes centering in the automotive industry and in that case we have to share things, otherwise we won't be able to survive," Suzuki said. "That's the trigger for making the proposal."

Toyota completed a buyout earlier this year of Daihatsu Motor Co., which is now taking on more responsibility for developing compact vehicles for its parent in emerging markets. Daihatsu's top competitor in Japan's minicar segment is Hamamatsu-based Suzuki.

Joining with Suzuki would add to a multitude of tie-ups Toyota's forged with Japanese car and truck makers. Toyota said last year it would broaden technology-sharing with Mazda Motor Corp. It's the majority owner of Hino Motors Ltd., the largest shareholder in Subaru maker Fuji Heavy Industries Ltd. and has a stake in Isuzu Motors Ltd. The automaker also owns stakes in a web of suppliers making everything from engines to car seats.

Carmakers are forging partnerships as an industry under pressure to curtail pollution struggles with major self-inflicted scandals. Mitsubishi Motors Corp.'s improper testing for fuel economy dating back decades led the automaker to seek a rescue by Nissan Motor Co., while Volkswagen has earmarked 18 billion euros ($19.9 billion) to cover the fallout of rigging its diesel engines with software to cheat emissions tests.

Nissan's plans to buy a stake in Mitsubishi Motor - already its partner for Japanese minicars - are centered on gaining a better foothold in Southeast Asia, where Toyota has a commanding presence.

Just before Volkswagen's emissions scandal broke, the German automaker parted ways with Suzuki following a years-long alliance that failed to yield a single joint project. Toyota, meanwhile, is about two years removed from winding down sales of the RAV4 EV, a plug-in sport utility vehicle developed with Tesla.

"The competition in R&D is very, very fierce," said Koji Endo, a Tokyo-based auto analyst at SBI Securities Co. With regards to electrification, autonomous driving and other fields, Suzuki lags behind its peers, he said. "Without a partnerships with a giant carmaker, it will be very challenging for them to stay in the race."

- Bloomberg