GM buys into Subaru

GENERAL Motors has announced it is to take a 20 per cent stake in Fuji Heavy Industries (makers of Subaru cars) at a cost of US$1.4 billion (about $2.12 billion).

The aim is to create a broad strategic alliance between the two car makers, although the agreement is rather like David and Goliath.

According to a statement issued by General Motors late on Friday, the two car makers will collaborate on the design, development and manufacture of cars, trucks and related technology.

Fuji will remain an independent company with Detroit-based GM as its largest shareholder.

The alliance agreement covers all aspects of the partners' business in all regions of the world. The companies anticipate that the partnership will focus initially on the design and manufacture of small and medium off-roaders, all-wheel-drive systems, continuously variable transmissions for mini cars, and integrated vehicle control systems. The companies also plan to work together on advanced technologies.

"This is a partnership that will make both GM and Fuji stronger companies in an increasingly competitive, global industry," according to Richard Wagoner, GM president and chief operating officer.

"The potential of the GM-Fuji alliance is significant. We come together as two healthy auto makers whose operations and areas of expertise complement one another." Takeshi Tanaka, president and chief executive officer of Fuji, said his company was attracted to GM in part because of the success of GM's relationships with Isuzu and Suzuki Motor Corp.

GM has a 49 percent stake in Isuzu and owns 10 percent of Suzuki.

"The GM alliance model, which allows a high level of management autonomy based on the principle of a true partnership, appealed to us and gave us the confidence to take this major step," Mr Tanaka said.

He said the potential for growth of FHI's business around the world was a key element that led to the agreement.

"GM needs to strengthen its presence in Japan. Fuji would like to boost its brand position in North America and Europe," he said.

"We plan to explore numerous opportunities around the world. Where there is a need, we will move aggressively together to meet it." "This partnership simply makes good business sense for both companies," Mr Wagoner said.

"By working together on products, distribution, parts, technology and purchasing, we'll both realise cost savings and dramatically improve our prospects for boosting global market share and profits." Wagoner said GM was impressed with Fuji's pioneering work in specialised technologies, such as all-wheel-drive systems and continuously variable transmissions for small vehicles.

"These technologies will help us grow stronger in the small and medium car segments, which are undergoing rapid growth around the world," Wagoner said.

Both companies have agreed to exchange preliminary information on their ongoing work in advanced future technologies, such as alternative propulsion systems and so-called "intelligent vehicles," to identify opportunities for joint research and development.

GM's equity participation indicates the seriousness with which each company is approaching the new alliance. Fuji is strong financially, so a capital infusion was not a necessity.

The GM-Fuji alliance will complement the similar partnerships GM already enjoys with Isuzu and Suzuki, he added.

"The automotive world of the 21st century will be very different from the one we know today. There will be more strategic alliances and partnerships. GM is fortunate to have three strong, thriving companies in Asia - Isuzu, Suzuki and now Fuji - with which to build for the future."