I guess if GM's selling, Toyota's buyin'. Maybe this will mean Isuzu will stay in the US, or perhaps the purchase is solely for diesel engine capabilities in cars and for larger light and medium duty (Hino) trucks?
Toyota buys 5.9 percent of Isuzu
James B. Treece | | Automotive News / November 7, 2006 - 2:29 am / UPDATED: 11/7/2006 9:12 A.M.
TOKYO -- Toyota Motor Corp. will buy 5.9 percent of truck- and diesel engine-maker Isuzu Motors Ltd. for $373.0 million, the automaker said today.
"We think we need to strengthen our diesel capabilities," said Toyota President Katsuaki Watanabe. He approached Isuzu at the end of July about a deal.
The companies plan to combine their diesel and alternative drivetrain efforts, perhaps leading to the development of vehicles powered by hybrid diesels.
Toyota and Isuzu have signed a memorandum of understanding to begin studies on possible business collaboration. The studies include:
Research and development, and then production, of small diesel engines, led by Isuzu.
Joint r&d of emissions-control technologies and devices for diesels, again led by Isuzu.
Environmental technologies, including those related to engines and alternative fuels, led by Toyota.
The deal will allow Toyota to expand its lineup of diesel engines.
"Isuzu's diesel engines will now be mounted on Toyota cars," Isuzu President Yoshinori Ida said.
Diesel share to grow
"We anticipate the growth of diesel engines going forward," said Watanabe. "As we grow globally, we need a good diesel engine in our lineup."
Neither Ida nor Watanabe would say which cars or markets would get Isuzu diesels. That will be worked out by joint study groups, they said.
Most of Toyota's current diesel engines are larger powerplants for commercial vehicles. Although exact figures were not immediately available, it is estimated Toyota produces fewer than 400,000 diesels engines a year that are smaller than 2.5 liters in size.
Moreover, many of those diesels were developed not by Toyota itself but by subsidiaries and affiliates. Those include truck maker Hino Motors Ltd., minicar specialist Daihatsu Motor Co., and machinery maker Toyota Industries Corp.
"In the future we may come up with a diesel hybrid as well," Watanabe said.
Ida said that combining Isuzu's diesel know-how with Toyota's engine and fuel technology may make a "quantum leap" possible.
Both executives stressed that it may take several years to fit Isuzu diesel engines into Toyota vehicles. That means no immediate extra business for Isuzu's underutilized Ispol diesel factory in Poland, and no sudden extra demand on its DMAX Ltd. diesel plant in Moraine, Ohio. That plant is a joint venture with General Motors.
"If we can take advantage of DMAX or Ispol, that would be best. But that's a matter to be considered later," Ida says.
Under the terms of the deal, Toyota will buy 100 million shares of Isuzu stock from trading houses Mitsubishi Corp. and Itochu Corp. The stock purchase will be completed on Friday, Nov. 10.
$373 million deal
Watanabe says Toyota will pay 440 yen, or $3.73 at current exchange rates, for the Isuzu shares. That means the deal is worth $373.0 million. That is almost a 6 percent premium to today's trading price of about $3.52 a share.
After the purchase, Isuzu's largest shareholders will be Mitsubishi Corp. with 9.7 percent of the stock, Itochu with 7.2 percent, and Toyota with 5.9 percent.
The deal is another example of Toyota linking up with an automaker that was cast off by GM.
GM sold its remaining 7.9 percent ownership of Isuzu in April, after having held partial ownership of Isuzu since 1971. In a move to raise cash, GM sold 90 million shares of Isuzu stock to Mitsubishi Corp., Itochu Corp. and Mizuho Corporate Bank for about $300 million.
Isuzu's Ida said the deal with Toyota will not affect Isuzu's business relationship with GM.
Although GM has ended its equity stake in Isuzu, the two maintain a business relationship. They share vehicles and diesel engines.
"We will continue our business relationship with them," Ida said.
In October 2005, Toyota linked up with Fuji Heavy Industries, the maker of Subaru cars, by buying an 8.7 percent stake in Fuji from GM for about $315 million. Toyota has since said it will use the Subaru plant in Indiana to build Camrys.
