As GM courts partners, Toyota watches closely

updated 3:55 p.m. ET Aug. 2, 2006

TOKYO - Toyota is keeping a close eye on the proposed alliance of General Motors, Nissan and Renault.

The three-way tie-up doesn't appear to pose any immediate business threat to Japan's No. 1 car company, which continues to grow steadily in market share and profits while going it alone for the most part. Toyota Motor Corp. has opted for only limited collaboration with rivals, on certain products for certain markets.

But a partnership that will bring struggling General Motors Corp. into the seven-year alliance between Nissan Motor Co. of Japan and Renault SA of France would have symbolic and, perhaps, political significance.

It would be the biggest ever in sheer size, boasting a combined annual production of 15 million vehicles, or about one-fourth of world production.

That has raised speculation that Toyota might ready an alternative offer if the deal doesn't work out. It has Toyota executives talking, if not revealing any plans.

Toyota Executive Vice President Mitsuo Kinoshita, for one, acknowledges the plight of General Motors is certainly "a big issue for America."

"We want to do what we can, and we're hoping for the best," he said on the sidelines of a recent news conference in Tokyo. "But we can't offer a helping hand now. GM is already in talks with Renault-Nissan."

Koji Endo, auto analyst at Credit Suisse First Boston Securities in Tokyo, believes no Japanese automaker — Toyota, Honda Motor Co. or Nissan — has much to gain in the short run by buying a stake in GM.

The Japanese automakers are doing fine on their own — boosting market share in the U.S. as soaring oil prices make fuel-efficient models such as the Toyota Corolla and Honda Civic increasingly attractive. The last thing they need is to take on ailing GM, Endo said.

Burdened with towering health care and pension costs for its workers, GM is in the red, losing $10.6 billion last year, shuttering plants and sending thousands of workers to early retirement. Last week, GM reported a better-than-expected $3.2 billion loss for the second quarter, mostly on employee buyouts and other restructuring costs.

By contrast, when Toyota reports first fiscal quarter earnings Aug. 4, it expects solid profits and sales, especially in the U.S.

"The only concern Toyota may have would be entirely political," Endo said. "Good relations with the U.S. is critical to Japan, and after all Toyota is Japan's biggest company."

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