Nov. 28 (Bloomberg) -- Toyota Motor Corp., the world's second-largest carmaker, plans to make vehicles at Fuji Heavy Industries Ltd.'s U.S. factory, raising North American capacity by 6 percent, said officials familiar with the plan.

Toyota may build between 100,000 and 120,000 Camry sedans or Highlander sports-utility vehicles at Fuji Heavy's Lafayette, Indiana factory starting in 2007, said the Toyota and Fuji Heavy officials, declining to be named. The two carmakers' presidents are due to discuss the proposal next week, the officials said.

The plan will give Toyota, which bought 8.7 percent of Fuji Heavy last month from General Motors Corp., capacity to build 1.93 million vehicles a year in the U.S. by 2008 without having to build a new plant. The assembler, based in central Japan's Aichi Prefecture, is forecasting a fourth year of record profit by March 2006, challenging GM as the world's largest car seller.

``It's a faster way for Toyota to expand,'' said Hitoshi Yamamoto, who manages $1 billion of Japanese equities as president of Commerz International Capital Management (Japan) Ltd. in Tokyo.

Toyota's spokesman Hideki Fujii and Fuji Heavy's spokesman Masaru Shoji declined to comment.

Shares of Toyota, which gets about 60 percent of operating income from the U.S., rose 2.7 percent to a record close of 5,990 yen in Tokyo. They gained 44 percent this year. Fuji Heavy shares surged 4 percent to 629 yen.

Toyota's Strategy

Toyota's U.S. market share gained for nine successive years, rising to a record 15.1 percent in October, led by sales of models including Camrys, Tundra pickup trucks, Lexus luxury cars and Prius gas-electric hybrids. The company sold 1.89 million vehicles in the first 10 months of 2005, 9.9 percent more than last year, according to Autodata Corp.

President Katsuaki Watanabe is expanding abroad to shield Toyota's earnings from a fluctuating yen and deliver vehicles faster to customers. The carmaker, which makes vehicles and components in more than 60 factories in 27 countries and regions, aims to increase global market share to 15 percent in the next decade from 12 percent.

At Detroit-based GM, Chairman Rick Wagoner is cutting North American production capacity by 30 percent over six years to 4.2 million units in 2008, shutting 12 production sites and slashing 30,000 jobs. GM sold its Fuji Heavy stake for a total of $737 million to Toyota and to the stock market.

Exchange Technology

Toyota and Fuji Heavy said they plan to exchange technologies and engineers in advanced technology, including gas- electric hybrid systems. Toyota may hire some of the 700 workers Fuji Heavy plans to retrench.

``We are focusing on development and production now'' and have no plans for joint procurement or sales at the moment, Toyota's president Watanabe said on Nov. 14.

Fuji Heavy uses less than half of its production capacity at the Indiana plant, set up in 1987. The carmaker expects to build 120,430 Subaru vehicles this year at the factory, out of a total annual capacity of 262,000 cars and trucks on two lines.

The Camry has been the best-selling car in the U.S. in seven of the past eight years. Sales of the model rose 2.9 percent to 368,672 units in the first 10 months of 2005, as record gasoline prices forced U.S. customers to ditch gasoline-guzzling trucks for cars that burn less fuel.

According to AAA's fuel-price Web site, U.S. average retail gasoline prices reached a record $3.06 a gallon in September and were at $2.18 as of Nov. 24, 12 percent higher than a year ago.

Camry, Highlander

Toyota builds Camrys in Kentucky and at the Tsutsumi factory near its head office in central Japan. The sedan competes with Honda Motor Co.'s Accord and Nissan Motor Co.'s Altima models.

The Camry's base price starts from $18,445 in the U.S. with a 2.4-liter four-cylinder engine and five-speed manual transmission.

The Highlander SUV, called the Kluger SUV in Japan, is made only at Toyota Motor Kyushu Inc. in southern Japan.

Nine of every 10 Highlanders exported from Japan last year were sold in the U.S., according to the carmaker. Toyota sold 116,424 units in the U.S. in the first 10 months, 5.7 percent more than last year.

The Highlander, competing with GM's Chevrolet Equinox, Ford Motor Co.'s Explorer and Honda's Pilot SUVs, is priced from $24,530 with a 2.4-liter engine.

The Toyota Camry sedans and Highlander SUVs share the same engine-and-chassis platform, allowing the two models to be built on the same factory line.

North America Production

Toyota, which may surpass GM as the world's biggest automaker as early as next year, increased its annual capital expenditure plan by 12 percent to a record 1.4 trillion yen ($11.7 billion) to expand production.

Toyota has five North American plants, with plans to open a sixth in San Antonio next year and a seventh in Woodstock, Ontario, in 2008.

Toyota's opening of a sixth North American assembly plant in Texas for Tundra pickups will increase its production capacity in the region to 1.71 million units next year from 1.51 million units now, Toyota said.

With a new factory in Canada opening in 2008 for its RAV4 SUVs, its total production capacity in North America, including Mexico, will be at 1.81 million units, the company said.

To contact the reporter on this story: Kae Inoue in Tokyo at kinoue@bloomberg.net; Naoko Fujimura in Tokyo nfujimura@bloomberg.net

Last Updated: November 28, 2005 04:23 EST