Toyota cancels project with Isuzu: sources

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 profitability prospects amid the recession, sources said today.  

Japan's top automaker will instead focus on marketing gasoline-electric hybrids in Europe as part of a new management strategy outlined by its new president, Akio Toyoda, who took the helm in June, the sources said.  

The move to scrap the joint development project of a diesel engine and reinforcement of fuel-efficient hybrid cars will represent a concrete example of Toyoda's earlier announced policy of drawing the line between areas to strengthen and withdraw from. Toyota was previously planning to build a new factory in Tomakomai, Hokkaido, and begin making the diesel engines from around 2012. But a source close to Toyota said, "There is currently no such plan."  

In December, Toyota said 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 tie-up in November 2006 under which Toyota bought 5.9 per cent of the Japanese truck maker's outstanding shares. Toyota, which had lagged behind in the development of diesel engines, had originally hoped to regain ground in the area through the alliance with Isuzu.