General Motors Corp Case Study

GM to Sell Its 20% Stake

In Fuji Heavy Industries

Toyota Will Buy an 8.7% Holding

In Maker of Subaru Sport Wagons

By JATHON SAPSFORD

Staff Reporter of THE WALL STREET JOURNAL

October 5, 2005 1:21 p.m.

TOKYO -- General Motors Corp. rocked the Japanese auto industry by announcing it would sell its entire 20% stake in Fuji Heavy Industries Inc., driving the maker of Subaru sport wagons into the hands of GM's archrival, Toyota Motor Corp.

Toyota said it would pay roughly $315 million for an 8.7% stake of Fuji, saying that antitrust concerns - Toyota already has 45% of the Japanese car market - discouraged it from buying more of Fuji. But the move underscored the diverging fortunes of GM, which is struggling financially and losing market share, and Toyota, which is increasing both share and profits in the vast majority of auto markets around the world.

Fuji Heavy President Kyoji Takenaka told reporters Wednesday that GM and Fuji Heavy have agreed to dissolve their relationship, and would rethink key joint projects. Fuji Heavy will continue to partner with GM in producing the Saab 9-2, a sport wagon, but Mr. Takenaka said the two will cancel plans announced last year to develop a Saab wagon-sport utility crossover vehicle, which will cause Fuji to take a charge of roughly $50 million during the current fiscal year related to the project.

"The two companies [GM and Fuji] concluded that mutually beneficial large projects are unlikely in the future," Fuji's Mr. Takanaka said. But Mr. Takenaka, sitting next to Toyota Executive Vice President Mitsuo Kinoshita, was quick to stress Fuji would now sit down with new partner Toyota to explore possibilities for a new range of areas for cooperation.

Toyota's role in the troubles at GM, which is losing money in its core auto operations, has been the subject of much speculation ever since Toyota Chairman Hiroshi Okuda told reporters this spring that the Japanese car industry should give the struggling car makers of Detroit some "breathing room" lest it spark a political backlash, and at one point even suggesting raising prices, an idea Toyota immediately dropped