Toyota tackles threat from tech giants with Mazda deal

Toyota is taking a 5 per cent stake in Mazda and that the companies will jointly build an assembly plant in the United States, pooling resources on new technologies.

The factory’s location has not been decided, but Toyota and Mazda said they hoped the first vehicles would roll off its production lines in 2021. The plant is expected to cost $1.6 billion and to employ about 4,000 workers, they said.

Akio Toyoda, chief executive of Toyota, said in January that the carmaker would invest $10 billion in the US over the next five years. Although plans for that spending predated the election of President Donald Trump, the announcement was widely seen as a response to Trump's vows to promote US manufacturing, pushing back against countries like Japan that have large trade surpluses with the US.

The alliance between Toyota and Mazda represents a small but significant step in the consolidation of the Japanese car industry, where a half-dozen producers compete for customers and capital. Toyota and Mazda said they planned to pursue joint development of electric vehicles and safety technology.

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In an era of soaring development costs and unsettling technological shifts - especially the emergence of battery-powered and self-driving cars - many smaller producers fear they lack the resources required to keep up. Even Toyota, one of the world’s largest producers of vehicles, with an output of 10 million units a year, has been accused by some critics of falling behind in research and development.

“In the future, mobility won’t belong only to carmakers,” Toyoda said at a news conference announcing the Mazda stake, noting that Silicon Valley was increasingly turning its gaze to the auto industry, looking to disrupt areas including design, manufacturing and retail distribution.

"Totally new players like Google and Amazon are right before our eyes," Toyoda said. "We need to cooperate and compete with them." Japan's smaller carmakers have sought partnerships with larger producers before. Mazda was owned by Ford Motor and Suzuki by General Motors for decades, but their American partners withdrew under financial pressure after the 2008 financial crisis.

Mitsubishi joined the Renault-Nissan alliance last year, after the French-Japanese group extended Mitsubishi a $2.2 billion lifeline to help it recover from a scandal over falsified fuel-economy ratings. Toyota has been extending its reach, as well. Last year, it took over its longtime minicar affiliate, Daihatsu. It has also been strengthening its links with Fuji Heavy Industries, the maker of Subaru cars, in which Toyota owns a 16.5 percent stake. And it has been discussing a new partnership with Suzuki.

Toyota and Mazda have been cooperating since 2010, when Toyota agreed to license its gasoline-electric hybrid-drive system to Mazda. The companies said in 2015 that they were exploring ways to expand their partnership. With the Prius and other hybrids, Toyota has dominated the market for lower-emissions vehicles for years. But as fully battery-powered cars gain favor with regulators and consumers, the company faces new challenges ? both from traditional competitors and new players like Tesla.

Mazda is known for making powerful and fuel-efficient internal combustion engines, but it lacks its own electric alternatives. Its sporty image and widely praised designs could appeal to Toyota: Toyoda has repeatedly spoken of his desire to give his company’s products more flair.

- (The New York Times News Service)