WORLD / Wall Street Journal Exclusive

Toyota won't derail GM's tie-up talks
By JATHON SAPSFORD (WSJ)
Updated: 2006-07-21 11:42

http://online.wsj.com/public/article/SB115338791871512196-idTRel2VBsHjfqv2iWi7gTNg0eQ_20060727.html?mod=regionallinks

TOKYO -- Toyota Motor Corp. stated flatly that it has no plans to involve itself in alliance negotiations among GM, Nissan and Renault. The Japanese auto maker also offered an elaborate apology for a worrisome series of recalls that has tarnished its reputation for quality.

General Motors Corp. is negotiating with rivals Renault SA and Nissan Motor Co. about a possible three-way alliance, which could include an exchange of equity. Toyota, with well over $30 billion in cash reserves and with existing cooperation arrangements with GM, is the one global auto maker that could derail any such plan. It could do this if it tendered its own bid for some sort of tie-up with GM, which one auto-industry executive said would be an "effective veto" over any deal among GM, Renault and Nissan.

Nothing of the sort will happen, said Toyota President Katsuaki Watanabe, speaking at the company's midyear business update in Tokyo. He stated strongly that his company has no interest in either blocking or joining the alliance talks. "We are not thinking about anything like that," Mr. Watanabe said.

Mr. Watanabe also said Toyota values highly its existing areas of cooperation with GM, including a jointly operated auto plant in Fremont, California, called New United Motor Manufacturing Inc., or Nummi. "We'd like to keep these arrangements as they are," Mr. Watanabe said, adding that Toyota is open to more areas of cooperation with rival car makers. He provided little reason to suspect Toyota was considering something specific and new with GM.

The media and the financial industry have been speculating about a possible role for Toyota in any deal with GM and other rivals, in large part because of Toyota's growing role as an industry leader.

Toyota has yet to surpass GM as the world's largest car maker by volume, but it has secured a leadership position by other measures. It is more profitable, and increasing sales and market share faster, than any other major car maker. Toyota said it is sticking to its initial global production plan for this year, targeting output of 9.06 million vehicles. It also is maintaining its global-sales target of 8.85 million vehicles.

Such a leadership role can be a burden. For months, critics have worried that Toyota is sacrificing some of its vaunted quality in a rush to bring new products to market and grow further. In recent months, Toyota has recalled hundreds of thousands of vehicles. One case involved a model sold in Japan known as the Hilux Surf, which allegedly had steering problems. Police say the faulty steering system may have lead to a head-on collision that injured five people. The police alleged negligence, but Toyota has denied wrongdoing.

Japan's Ministry of Land, Infrastructure and Transport is examining Toyota's handling of recent recalls, and ministry officials are hinting that some sort of public reprimand for Toyota may be in order. Any such official reprimand would be largely symbolic, an official familiar with the matter said, and probably wouldn't carry any fines or penalties.

For Toyota, however, quality and safety are the cornerstones of its entire global operations, and despite denials of breaking any rules, Toyota went out of its way to show contrition for the recalls at its news conference in Tokyo. At the same time, Toyota boasted of no new products or expansion plans, as has become common at its recent media events. The company gave no press materials to the media.

Toyota's senior management team even shunned the open-collar, short-sleeved shirts the company has adopted for summer to help cope with Japan's sticky weather, instead appearing in dark suits.

The message behind the funereal atmosphere was clear: "I take this seriously and see it as a crisis," Mr. Watanabe said. He then bowed deeply in front of the cameras, adding, "I want to apologize deeply for the troubles we have caused."