Fuji Heavy Industries Ltd. is negotiating with General Motors Corp. of the United States for a broad strategic tieup that includes a capital tieup, the Japanese automaker confirmed on Thursday. Sources close to the negotiations said the two firms are discussing the possibility of GM obtaining a 10 percent to 20 percent stake in Fuji Heavy. They may reach an agreement this month. GM's capital participation in the Japanese automaker would be limited to no more than 20 percent to maintain Fuji Heavy's independence, according to the sources. Fuji Heavy, however, has refrained from commenting on details of the talks since they have not reached a final agreement. The firm is examining various possibilities for cooperating with foreign automakers, it said. A GM public relations official in New York said that while the company has a long tradition of seeking tieup opportunities, he could not comment on the Fuji deal because it is supposition at present. The sources said Fuji's technology and knowhow will help the U.S. auto giant expand its production line and bolster its Asian operations. GM has already formed capital tieups with two other Japanese automakers -- Suzuki Motor Co. and Isuzu Motors Ltd. GM is aiming to capture a 10 percent share of the Asia-Pacific market in five years. Established in 1953, Fuji Heavy Industries deals in manufacturing and selling automobiles, aircraft and aerospace-related equipment. The midsize automaker, known for its Subaru brand vehicles, has been seeking ways to survive intensifying global competition in the automotive industry. It is widely viewed that it will be difficult for Fuji to survive the global competition on its own as costs to develop environment-friendly cars are putting a heavy financial burden on automakers. Unlike most Japanese automakers, which have suffered from the prolonged slump in car sales, Fuji Heavy has enjoyed an increase in sales and profits for three consecutive years, mainly due to favorable sales in North America. In the recent midterm earnings' report, Fuji reported record sales and profits helped by strong sales of minicars in the domestic market. As for GM's possible method of acquiring Fuji Heavy shares, the sources said there are several scenarios. These include buying new shares to be issued by Fuji Heavy on a third-party allotment basis or purchasing Nissan Motor Co.'s shares. Nissan Motor, which is undergoing massive restructuring, is the largest shareholder in Fuji Heavy, with a 4.1 percent stake. Prime Minister Keizo Obuchi told reporters that he basically welcomes the deal between GM and Fuji Heavy. He pointed out that alliances have become a trend in the global automobile industry and expressed hope the deal would bear favorable results. The Detroit-based GM group sold 8.16 million vehicles around the world last year, posting sales worth 18.55 trillion yen.
