NAGOYA (Kyodo) Toyota Motor Corp. has called off a joint project with Isuzu Motors Ltd. to develop a diesel engine for small vehicles for the European market due to low prospects for profit amid the recession, sources said Tuesday.
Toyota will instead focus on marketing gasoline-electric hybrids in Europe as part of a new management strategy outlined by new President Akio Toyoda, the sources said.
The move to scrap the joint development of a diesel engine and reinforce fuel-efficient hybrid cars will represent a concrete example of Toyoda's earlier announced policy of drawing the line between areas to either strengthen or withdraw from.
Toyota was previously planning to build a new factory in Tomakomai, Hokkaido, and begin making the diesel engines around 2012.
But a source close to Toyota said, "There is currently no such plan."
Toyota said in December it had frozen the project to curb research and development costs amid deteriorating business conditions but apparently decided to call it off altogether with auto demand showing few signs of recovering.
Toyota and Isuzu formed a capital and business tieup in November 2006 under which Toyota bought 5.9 percent of the truck maker's outstanding shares.
Toyota, which had lagged behind in the development of diesel engines, had originally hoped to regain ground through the alliance with Isuzu.