Toyota, Mazda in Talks on Hybrid Cars

By YOSHIO TAKAHASHI

TOKYO -- Toyota Motor Corp. and Mazda Motor Corp. are in talks over the supply of components of Toyota's hybrid system to its smaller rival, a person familiar with the matter said.
The talks underscore Toyota's dominance of the hybrid market, with its patents on more than 2,000 systems and components proving attractive for rival companies who find it hard to develop their own hybrid systems quickly and cost effectively.
It remains uncertain whether the two companies will reach an agreement, the person familiar with the situation said.
If a deal is reached, Mazda will join Ford Motor Co. and Nissan Motor Co. as users of Toyota's hybrid technology in their own fuel-efficient models.

For Toyota, a tie-up with Mazda could reduce the cost of its hybrid systemby increasing output.
The president of Fuji Heavy Industries Ltd., the maker of Subaru-brand cars, said in May that his company also aims to roll out a hybrid model by 2012 using Toyota's hybrid system. Toyota holds a 16% stake in Fuji Heavy.
Toyota's talks with Mazda, in which Ford owns a 14% stake, come as major car makers are scrambling to develop more fuel-efficient cars as emission regulations get stricter in key markets.
But this is a tough task for many companies to face alone, as they cut back on research and development operations amid an industry-wide slump.
For Toyota, which enjoys strong demand for its redesigned Prius hybrid, a potential tie-up with Mazda could help reduce the cost of its hybrid system through higher production volumes, helping it to maintain its position as the world's No. 1 maker of hybrid vehicles.
Mazda, which has lagged behind in the race to offer advanced fuel-efficient cars, would be able to roll out a low-emission model in a shorter time by using Toyota's technology.
It is unclear how closely Mazda will cooperate with Ford in developing its own hybrid technology, after the U.S. car maker last year sold part of its then 33.4% stake in Mazda.
In California, the Hiroshima-based car maker currently sells a hybrid sport-utility vehicle powered by Ford's system, and it leases to customers in Japan a hybrid minivan that runs on either hydrogen or gasoline.
In the near term, Mazda is focusing on improving the fuel-efficiency of its combustion engines, and has no plans to launch electrified cars before the targeted launch of its new hybrid car around 2012.
Write to Yoshio Takahashi at yoshio.takahashi@dowjones.com