TOKYO - Subaru may be the next brand to stop driving solo.
General Motors is preparing to buy a 20 percent stake in Fuji Heavy Industries Ltd., maker of Subaru cars, by year end, according to Tokyo press reports.
Officially, Fuji Heavy reiterated only that it is talking with GM and other foreign carmakers on technical tie-ups and various other possibilities. 'Details have not been decided,' GM said in a statement.
'We continue to proactively explore new business opportunities with a variety of potential partners,' said GM spokesman John Mueller. 'But we have nothing to announce in this case, or in any case for that matter.'
Analysts said that the prospective equity deal makes sense for both companies.
Fuji would get the cash, capacity and distribution network it needs to move forward. GM would get yet another building block in its drive to double its share of the Asian-Pacific market to 10 percent, plus a powerful and successful brand.
Analysts say Fuji Heavy needs a partner with deep pockets.
'They have the right product but lack the means to maximize their potential,' Chris Richter, Tokyo-based auto analyst for HSBC Securities (Japan) Ltd., said of Fuji Heavy.
Fuji Heavy management recently indicated to Richter that the company was looking to expand production at its Subaru-Isuzu Automotive Inc. plant in Indiana, mulling building its new six-cylinder boxer engine in North America and aiming to boost annual European sales from 50,000 to 100,000.
'I doubt they would even be looking at such proposals without having an agreement in the works,' Richter said.
If GM wants to buy a Fuji Heavy stake, some current shareholders may be ready to sell. Cash-starved Nissan Motor Co. Ltd., for example, owns a 4.1 percent stake in Fuji Heavy.
Another appeal of linking with GM may be GM's willingness to take only a 20 percent stake.
'They don't get control, but they get to say, `This is our company,' ' thus keeping other suitors away, said Stephen Usher, Tokyo-based auto analyst for Jardine Fleming Securities (Asia) Ltd. 'It's the Suzuki deal all over again.'
GM owns 10 percent of Suzuki Motor Corp. but has no management influence. No GM-named directors sit on Suzuki's board.
'Ford wouldn't give them the autonomy they want,' Usher said. 'DaimlerChrysler wouldn't come close to giving them the autonomy they want.'
U.S. analysts say GM could use a well-focused Subaru brand and the niche market Subaru has built around its all-wheel-drive technology.
Jim Hall, vice president of industry analysis at consulting firm AutoPacific Inc's Southfield, Mich., office, said Subaru's strong stable of vehicles could spice up GM's lineup outside North America. Currently, GM's international operations depend too much on boring vehicles designed by GM's Adam Opel AG, Hall said.
A.J. Guanella, executive vice president of Burt Subaru and Burt Chevrolet in Englewood, Colo., likes the idea of GM and Subaru working together. With GM as its partner, he said Fuji finally could give Subaru dealers some larger vehicles, such as a minivan.
GM, in return, would get awd expertise and Subaru's more affluent customer base.
Said Guanella: 'It would be smart on GM's part.'