DECEMBER 27, 2006
Autos
By Matt Vella
And Now: Ford and Toyota?
Ford is ailing. Toyota is surging. Did the two meet recently to discuss a hookup—and would it even make sense?
Are Toyota Motor and Ford Motor working toward negotiations that could, eventually, lead to some kind of partnership between the two auto giants?
That question was sparked this morning by a report in the online version of the Nihon Keizai Shimbun, a Japanese business daily, of high-level meetings between Ford's Chief Executive Officer Alan Mulally and Toyota's Chairman Fujio Cho.
According to that newspaper, the two met last week in Japan along with Ford (F) Executive Vice-President Mark Fields, the company's point-man on the difficult restructuring of North American operations. Unnamed sources in the report cited Ford's interest in Toyota's hybrid and fuel-cell powertrains, as well as the company's legendarily lean manufacturing processes.
Neither Ford nor Toyota (TM) would comment on the talks. Nevertheless, speculation caused Ford's stock to jump 10 cents, or 1.4%, to $7.52, on Dec. 26, and it traded as high as $7.53, well below the stock's 52-week high of $9.48. The fluctuations come on the same day as a Bloomberg report that Ford has one of the lowest average analyst ratings for stocks in the Standard & Poor's 500, underscoring the company's significant troubles on Wall Street.
A Fan of Toyota Mulally, who took the reigns of the struggling American automaker in October, has expressed admiration for Toyota's success. As an executive at Boeing (BA), he said he had studied the automaker's manufacturing processes closely.
The report further speculated that dealings with Ford could help Toyota politically and in public-relations terms as its sales continue to swell in the North American auto market. Toyota's U.S. market share is up to 14.6%, from 9.3% six years ago, and the company has earned more than $10 billion a year over the past three years. After passing Ford as the No. 2 automaker in the U.S. in November, the company will most likely surpass General Motors (GM) globally next year.
It wouldn't be the first time the two companies have worked together. In 2004, Ford and Toyota struck a deal to exchange patents. Ford gained access to technology that helped it accelerate the development of its hybrid program. Toyota, meanwhile, benefited from Ford's expertise in direct-injection and diesel-engine technologies.
What Would Toyota Gain? In a limited way, Toyota has also worked with GM. The two jointly operate a plant in Freemont, Calif., where the Toyota Corolla, Matrix, and Tacoma pickup are assembled alongside the Pontiac Vibe.
Still, it's unclear how any agreement between the two would be balanced. While Ford could stand to benefit from Toyota's expertise in gas-electric hybrids and manufacturing expertise, it remains unclear what Toyota would gain materially from such a venture.
Indeed, it might make more sense for Ford to team up with Toyota's Japanese rival Honda (HMC). That company also has efficient production facilities as well as gas-electric hybrid and hydrogen fuel cell technology on hand. But unlike Toyota, it's looking to establish itself in Europe, where Ford and GM continue to maintain an advantage (see BusinessWeek.com, 9/14/06, "GM's Turnaround in Europe").
Talking Points What's certain is that high-level hookups, speculation over which occupied analysts and industry observers throughout most of 2006, haven't lost their allure or ability to make news. Talks between General Motors and Renault and Nissan (NSANY) made headlines throughout the summer, as the companies mulled a deal to share technology and production capacity.
In July, as rumors concerning the GM-Renault-Nissan talks peaked, news broke that Toyota executives might themselves be war-gaming a plan to make a play for GM of their own. But at the close of the calendar year, GM-Renault-Nissan talks have fizzled, and a Toyota proposal—if there ever was one—failed to materialize (see BusinessWeek.com, 7/14/06, "Will Toyota Make a Play for GM?").
Now, a mere two weeks before the Detroit Auto Show, the news of possible negotiations between Ford and Toyota is bound to electrify industry insiders, analysts, and observers going into next year's opening act.
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