• USA Today/AP, Thursday, April 10, 2008 10:32 AM

Toyota Motor and Subaru parent Fuji Heavy Industries say that they will expand their ties and develop a compact, rear-wheel drive sports car by 2011. Toyota says the step is part of its plan to revamp business alliances with Fuji Heavy and Daihatsu, a Toyota subsidiary. The move will also expand the scope of the joint car production among the three.

Daihatsu specializes in minicars, which are limited to an engine size of up to 660 cubic centimeters. The tiny cars are growing in popularity because of soaring gasoline prices and ecological concerns. The latest agreement will strengthen an existing alliance, in which Fuji makes Toyota Camry sedans in the U.S., while Daihatsu makes the Justy compact car that Fuji sells in Europe.

Toyota will buy 61 million Fuji Heavy shares from Fuji for 31.1 billion yen ($311 million), the companies say, increasing its stake of 16.5%. It currently owns an 8.7% stake in Fuji Heavy.

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