Oct. 17 (Bloomberg) -- When Toyota Motor Corp. redesigned the electric motor in its Estima hybrid minivan, it asked affiliates, including parts makers Denso Corp. and Aisin Seiki Co., to provide engineers for advice on cutting costs.

Toyota, the world's biggest automaker by market value, gained 80 percent of its average annual cost savings of 230 billion yen ($2 billion) in the past three years by working with suppliers on design and development of new models, said Senior Managing Director Takeshi Suzuki.

While all carmakers work with suppliers on new models, Toyota shares the cost savings, guarantees business and owns stakes in its biggest suppliers. Ford Motor Co. and Nissan Motor Co. have cut the number of parts makers. General Motors Corp. spun off its biggest supplier, Delphi Corp., which is now in bankruptcy.

``Toyota's approach with its suppliers has proved to be the right one,'' said Ashvin Chotai, a London-based automotive analyst for Global Insight Inc. ``Toyota's strength not only lies in its own brand and products, but also from its team work, which is unprecedented by other automakers in the world.''

Market Share Goal

Toyota is relying on its network of suppliers, or keiretsu, as it tries to raise its share of the Japanese market to 45 percent from 40 percent. The company plans to increase 2005 sales in Japan by 1.6 percent to 2.42 million units.

`` It's key for these companies to do well with Toyota'' said Koji Endo, an analyst at Credit Suisse First Boston in Tokyo. ``In addition to the business, working with Toyota is like a seal of quality approval in the industry.''

Toyota, the world's biggest maker of gasoline-electric vehicles, will display the Estima hybrid concept at the Tokyo Motor Show later this week, along with models including the fuel cell hybrid Fine X and Lexus GS450h hybrid sedan.

Toyota's shares, which have gained 25 percent this year, fell 0.2 percent to 5,220 yen in Tokyo on Friday. That compares with Nissan's shares, which have increased 14 percent this year and Honda's shares, which have risen 24 percent.

``Toyota enjoys extensive resources from its suppliers and group companies,'' said Masayuki Kubota, who helps manage about $8.5 billion at Daiwa Investments Ltd. in Tokyo. ``That, coupled with the company's strong potential in coming years, has helped drive up the company's shares.''

Cutting Suppliers

Nissan has cut the number of suppliers by more than 40 percent and sold its stakes in about 1,400 banks and companies since 1999. Nissan's reliance on spot supplies for steel meant it had to cut production last year, when there was a shortage of the metal. Toyota was unaffected.

Honda, which boosted its stakes in Kikuchi Co. and Nippon Plast Co. earlier this year, has never established a formal keiretsu network for its suppliers.

Mitsubishi Motors Corp., which has posted two consecutive annual losses, dissolved its keiretsu in 2002 at the instigation of DaimlerChrysler AG, Mitsubishi Motors' biggest shareholder at the time. In June 2005, 158 suppliers formed a new group to supply Mitsubishi Motors.

Record Earnings

Toyota's group of 206 closest suppliers and affiliates are gaining as Toyota boosts vehicle sales by 7.6 percent to 7.97 million units to a record this fiscal year. Denso expects profit to rise 1 percent to a record 134 billion yen this fiscal year. The company's shares have risen 16 percent.

By contrast, Delphi declared bankruptcy after failing to win $6 billion in aid from GM.

Koito Manufacturing Co., a maker of headlights which is 20 percent owned by Toyota, expects a fourth consecutive year of record earnings and will expand in the U.S. and India, following Toyota.

Denso, 23 percent owned by Toyota, supplied four new components for Toyota's gasoline-electric sport-utility vehicles in April.

``We are currently developing our technology and parts to be used for the next-generation hybrid vehicles,'' said Denso President Koichi Fukaya said in an interview earlier this year. ``We want to offer it to Toyota as soon as possible and we want to serve Toyota first.''

Toyota bought an 8.7 percent stake in Fuji Heavy Industries Ltd. from GM this month. Fuji Heavy may begin supplying Toyota with batteries for hybrid vehicles and all-wheel drive systems.

``Toyota was probably one of the first companies to work really closely with its suppliers, which generates a stronger bond,'' said Global Insight's Chotai. ``The supplier chain can reflect the strengths of companies.''

North America

In addition to its base in its home market, Toyota is the most favored carmaker by suppliers in North America, its largest market. Toyota makes vehicles in more than 60 factories in 27 countries.

Of the 259 suppliers responding to the Fifth Annual North American Automotive-Tier 1 Supplier Study, 63 percent said their relationship with Toyota was good or very good. Toyota's relations with suppliers were better than all other automakers.

In contrast, the survey showed only 3 percent of the suppliers had a good relationship with GM, while 85 percent said their relationship to GM was poor.

``We are open to all suppliers to do business,'' said President Katsuaki Watanabe earlier this year. ``We want to come out with the best products in cooperation with our suppliers.''

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

Last Updated: October 16, 2005 19:20 EDT