Toyota set to tie up with Yamaha on F1 Entry
Monday March 6th, 2000
Toyota Motor Corp looks set today to announce an alliance with Yamaha Motor Co, the world's second largest motorcycle maker, in a bid to strengthen its engine development ahead of its entry into Formula One racing.
Toyota, the world's third largest automaker, said it would make an announcement on strengthening its ties with the motorcycle maker at 4.30 p.m. (0730 GMT).
Japanese media earlier reported that Toyota would buy a five percent stake in Yamaha Motor from its parent company Yamaha Corp, the maker of musical instruments, for 10 billion yen ($93 million).
The auto industry had expected the two to work together on F1 racing, but had not expected Toyota to take an equity stake in Yamaha. Analysts said both firms would benefit from a deeper relationship.
The investment is relatively small for Toyota which has around 2.7 trillion yen in liquid assets. It would be a welcome gain for Yamaha Corp which is expected to post a current loss of one billion yen in the year to March 31 according to estimates collated by First Call/Thomson Financial.
"The scope for cooperation is reasonably broad with Yamaha being the main beneficiary," said Stephen Usher, auto analyst at Jardine Fleming Securities. "It's certainly not bad for Yamaha... to have a deep pockets partner like Toyota."
Yamaha may also gain access to Toyota's global distribution network making it more competitive against arch rival Honda Motor Co, the world's biggest motorcycle manufacturer.
For Toyota, which plans to enter F1 racing for the first time in the next couple of years, tapping into Yamaha's motor-racing experience will not only help boost its performance in the sport, but also raise its appeal to the young, analysts said.
Analysts added that companies also have a marine products division and the potential for synergies also exist there.
The stock market welcomed the reports of an impending deal. Yamaha Motor jumped 84 yen or 10.18 percent to 909 yen, while Toyota was up 10 yen or 0.23 percent to 4,360 yen in late afternoon trade.
($=108 yen)