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Ford to Join With Toyota to Develop Hybrid Pickup Trucks, SUVs

Ford Motor Co. (F) and Toyota Motor Corp. (7203), the world’s biggest seller of gasoline-electric autos, plan to collaborate to develop a hybrid system for pickup trucks and sport-utility vehicles as U.S. fuel-economy rules tighten.

The automakers reached a preliminary agreement that calls for selling vehicles with the technology this decade, as well as working together on in-car communications systems and Internet- based services, according to a joint statement yesterday.

Ford is joining forces with Toyota City, Japan-based Toyota, maker of the best-selling Prius gasoline-electric car, as the U.S. automaker plans to triple North American output of electric vehicles and hybrids to more than 100,000 by 2013. Ford Chief Executive Officer Alan Mulally and Toyota President Akio Toyoda personally negotiated the potential tie-up, said Derrick Kuzak, Ford’s product development chief.

“It’s understandable that they would tap each other for their expertise in these areas,” said Aaron Bragman, an industry analyst at Global Insight in Troy, Michigan. “It is such an unexpected tie-up between these two companies, we’re still trying to understand the implications.”

The companies want to have a final agreement by next year, focused on developing a rear-wheel-drive system to handle larger vehicles, Ford’s Kuzak said at a press conference in Dearborn, Michigan, where the second-largest U.S. automaker is based. The collaboration is the first between Ford and Toyota, he said.

Fuel Economy

The announcement comes after President Barack Obama won an agreement from automakers in July to double the Corporate Average Fuel Economy, or CAFE, for vehicles sold in the U.S. to 54.5 miles per gallon by 2025.

“The new CAFE structure demands that fuel-economy gains be made in all light-vehicle segments, not just a portion,” said Michael Robinet, director of global product forecasts for consultant IHS Automotive in Northville, Michigan. “Everyone is looking at new ways to increase fuel economy.”

The challenge for pickups and large SUVs will be to maintain capability while increasing fuel economy, Robinet said. Unlike in cars, “downsizing is not a preferred option,” he said.

The agreement “brings together the capability of two global leaders in hybrid vehicles and hybrid technology to develop a better solution more quickly and affordably,” Kuzak said in the statement.

Working Out Details

“We have a lot of details to work out with Ford before we can tell you more,” Takeshi Uchiyamada, a Toyota executive vice president and the head of its research and development, told reporters in Dearborn.

The goal “is to bring to market a product that is very good, very affordable and very soon,” said John Hanson, a Toyota spokesman in Torrance, California, without elaborating.

Ford licensed Toyota technology for the hybrid version of its Escape small SUV in 2004, which also used parts from suppliers affiliated with the Japanese automaker.

The U.S. company’s current hybrids “are completely developed, designed and engineered by Ford,” Kuzak said.

Mulally and Toyoda began their discussions in a chance meeting in a U.S. airport, Uchiyamada said, adding that he didn’t know when or where that occurred. The companies’ product development staffs started talks in April, he said.

Ford and Toyota declined to say which trucks and SUVs will use the jointly developed hybrid technology. Ford’s F-Series pickup is the top-selling vehicle in the U.S., and the automaker sells several SUV models, such as the Ford Explorer and Lincoln Navigator. Toyota sells the Tundra large pickup, Tacoma small pickup and SUVs such as the Highlander and Sequoia.

Current Hybrids

Ford, which wants to make a quarter of its vehicles run at least partly on electricity, now offers hybrid versions of the Escape and the Ford Fusion and Lincoln MKZ sedans. It sells about 35,000 hybrids annually.

Toyota’s Prius is the top-selling hybrid in the U.S., with 74,427 sold this year through July and 140,928 in all of 2010.

Toyota has said it may eventually offer hybrid versions of every model in its lineup. Still, 14 years after the Prius was first sold in Japan, the company hasn’t offered hybrids larger than its midsize Highlander and Lexus RX SUVs.

The Japanese company is also working with electric-car maker Tesla Motors Inc. (TSLA) on a battery-powered version of the Toyota RAV4 sport-utility vehicle that begins sales in 2012.

The Toyota-Ford collaboration could expand into projects beyond hybrid trucks and SUVs and in-car communications, Uchiyamada said.

Market Gap

Ford and Toyota are filling a gap in the market that both have been slow to compete in, said Michael Omotoso, senior manager of global powertrain at J.D. Power & Associates. At the same time, he said, sales of hybrid pickups and SUVs at rivals such as General Motors Co. (GM) have been lackluster.

GM’s hybrid Silverado and Sierra pickups and Tahoe, Yukon and Escalade SUVs “haven’t sold very well” because of large price premiums and lower towing capacity, Omotoso said in a telephone interview.

“It’ll be interesting to see if in this joint venture the towing capacity is the same or the difference is negligible,” said Omotoso, who is based in Troy, Michigan. “If they can figure that out, that would help their hybrids outsell GM’s.”

In 1999, Toyota and Detroit-based GM announced plans for a broad partnership on hybrids and hydrogen fuel-cell vehicles. GM ultimately declined to pursue the collaboration. Toyota also shared an assembly plant in Fremont, California, with the former GM for 25 years until the U.S. company pulled out in 2009 as part of bankruptcy proceedings.

Production Plans

Ford rose 2 cents to $10.01 yesterday in New York Stock Exchange composite trading. Toyota’s American depositary receipts fell 16 cents to $70.54.

The U.S. automaker expanded production plans in June for the C-Max hybrid wagon and C-Max Energi plug-in hybrid. The company plans to begin producing the five-passenger wagon next year in the U.S., where it doesn’t expect to sell a gasoline- only version. Ford also intends to introduce an electric version of its Focus small car in 2012.

Mulally has revived Ford in part by focusing on fuel efficiency and broadening the lineup with small cars such as the Fiesta. Ford is the only major U.S. automaker to avoid bankruptcy, and earned $9.28 billion in the past two years after $30.1 billion in losses from 2006 through 2008. The automaker reported net income of $4.95 billion in this year’s first half.

To contact the reporters on this story: Keith Naughton in Dearborn, Michigan, at Knaughton3@bloomberg.net; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net

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