Tuesday, January 23, 2007

Toyota and Ford: In Search of an Alliance

Forming alliance is nothing new in the international corporate world. So, there is nothing shocking in the news that Ford and Toyota are sleeping on the idea of making a serious alliance among the two auto makers. Ford is the second largest American automaker while Toyota is the largest Asian automaker. Toyota is making serious inroads in the American auto industry.

The Cincinnati Post reported:

Part of Toyota's aim in courting Ford is diplomacy - an effort to win what people familiar with Toyota management's thinking describe as political peace from the U.S.'s second-biggest producer of automobiles. Although protectionist rhetoric has abated significantly compared with 15 years ago, Toyota officials remain concerned about a possible backlash as they continue to gain market share in the U.S. while Detroit's Big Three shut factories and ax jobs. Analysts widely expect Toyota to outsell Ford in the U.S. on an annual basis as early as this year.

Toyota also could benefit in a practical way if Ford agreed to use its gasoline-electric hybrid technology. That is in part because Toyota's momentum in establishing its hybrid design as an industry standard has slowed. GM, for instance, has lured German auto makers DaimlerChrysler AG and BMW AG into a powerful alliance to develop a hybrid system of their own that they say is simpler than Toyota's. Other companies, including Honda Motor Co., are trying to go it alone.

Any alliance would likely have some impact on the thousands in this region who work for Toyota and Ford. Toyota operates its largest U.S. plant in Georgetown, Ky., where it is making a hybrid Camry, and its North American manufacturing operations are headquartered in Erlanger. Ford operates two transmission plants here.

It is wrong to think that Toyota alone will be benefited from any alliance between the two automakers. There is something for Ford too. Ford can use the alliance to increase sales in Asia- the traditional strong hold of Toyota.