THE Toyota Motor Corp will pay US$311 million to raise its stake in Fuji Heavy Industries to 16.5 percent, and the two companies will expand their ties and develop cars together, they announced jointly yesterday.

Toyota said the step is part of its plans to revamp business tie-ups with Fuji Heavy, the Japanese maker of Subaru cars, and Daihatsu Motor Co, a Toyota subsidiary that makes small cars. The move will also expand the scope of the joint car production among the three.

The latest agreement will strengthen an existing alliance, in which Fuji makes Toyota Camry sedans in the US, while Daihatsu makes the Justy compact car that Fuji sells in Europe.

Toyota will buy 61 million Fuji Heavy shares from Fuji for 31.1 billion yen (US$311 million), the companies announced in a news conference at a Tokyo hotel, attended by Toyota President Katsuaki Watanabe, Fuji President Ikuo Mori and Daihatsu President Teruyuki Minoura.

Fuji and Toyota will also develop a car together, a compact, rear-wheel drive sports car, intended for 2011, they said, without elaborating.

"The alliance with Fuji heavy is a win-win situation," Watanabe said. "We can count on Fuji's superb engineering."

Daihatsu at present specializes in minicars.