• The Wall Street Journal, Thursday, October 25, 2007 12 PM

Companies including General Motors, Toyota and Daimler are increasing spending to research and develop a range of projects--cleaner gasoline and diesel engines, hybrid systems and electric and fuel-cell cars as well as ethanol-powered cars--that cut carbon-dioxide emissions and improve fuel economy.

To reduce costs and speed development, some companies have begun joining hands with rivals. GM, which is competing with Toyota to retain its No. 1 spot in global sales for this year, is developing a hybrid power source in partnership with BMW and Daimler, for example, in an effort to catch up with Toyota. And Toyota last year teamed up with local truck maker Isuzu Motors to develop new, cleaner-diesel engines to battle rivals in Europe.

Combined R&D costs at Japan's top three automakers--Toyota, Honda and Nissan--will rise 34% in the fiscal year ending in March from five years earlier because of investments in green technologies. Koji Endo, an analyst at Credit Suisse, expects car makers will continue to seek alliances in certain technology areas that they can't work on alone.

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