By Micheline Maynard
International Herald Tribune

December 27, 2006

(Detroit) The new chief executive of Ford Motor, which is struggling to
bounce back from one of the worst crises in its history, met last week in
Tokyo with the chairman of Toyota Motor, which is poised to become the
world's biggest auto maker next year.

Ford's chief executive, Alan Mulally, and Mark Fields, the head of Ford
operations for the Americas, attended the meeting last week with Toyota's
chairman, Fujio Cho, and other top Toyota executives, senior officers at
both companies said Tuesday, speaking on the condition of anonymity.

Toyota issued a statement Wednesday describing the meeting as a courtesy
call, but did not say what was discussed.

"We held talks at the request of Ford," the president of Toyota, Katsuaki
Watanabe, said in Nagoya, according to Bloomberg News, citing Kyodo News.

Toyota and Ford officials, as well as the Japanese news media that first
reported on the meeting, indicated that the talks had focused on developing
environmentally friendly technology, like hybrid-electric and hydrogen fuel
systems, as well as on ways that Toyota could help Ford improve its
manufacturing efficiency.

The meeting of Mulally, Fields and Cho follows talks held this summer
between General Motors, Renault of France and Nissan of Japan.

But Ford and Toyota are not believed to have discussed anything that
resembled the joint purchasing or car- production ideas that were the
subject of GM's talks with Renault and Nissan, which ended in October
without any agreement.

Ford and Toyota have an association that stretches back to the 1950s, when
Ford allowed managers from Toyota, which was trying to regroup after World
War II, to study the operations at its giant Rouge complex in Dearborn,
Michigan.

The visits helped Taichi Ohno develop the Toyota production system, which
emphasizes driving out waste, fostering worker involvement and making
continuous improvements on the factory floor.

Toyota also came to Ford in the 1980s when it was looking for an American
partner with which to open its first plant in the United States.

The two companies held brief discussions that could have led to a joint
Ford- Toyota venture to build a version of the midsize Camry for each
company. Instead, Toyota entered into a joint venture with GM that recently
celebrated its 20th anniversary.

Now, Toyota and Ford may work together again as Ford tries to regroup from a
third-quarter loss of $5.8 billion in North America.

Cho, who worked under Ohno and ran Toyota's plant in Georgetown, Kentucky,
before becoming its chief executive and subsequently its chairman, is
concerned about the financial problems facing Ford, an executive at Toyota
said.

"If he can do anything to help them out of this, he would like to," the
executive said.

Analysts have said that Ford probably had little to offer Toyota in terms of
cash or know-how, though Toyota could be seeking access to Ford's hybrid
technology. Rather, they said, Toyota was probably hoping to deflect
criticism from Washington as it seeks to overtake GM.

"If it forges a relationship with Ford, Toyota is probably hoping it will be
seen as a goodwill move," said Chester Dawson, author of "Lexus: The
Relentless Pursuit." He added, "Toyota is wary of inciting trade friction."

James Womack, co-author of "The Machine That Changed The World," which
examines Japanese automakers' American plants, said, "Toyota has nothing to
gain, either politically or in the market, by letting Ford fail fast."

Toyota, the world leader in hybrid- electric cars, already licenses hybrid
technology to Ford, which sells a hybrid version of the Ford Escape, a small
sport utility vehicle.

Ford has its own hybrid program, but it cut back on hybrid development this
year when it decided to place more emphasis on developing flexible fuel
vehicles that can run on gasoline and another type of fuel, like ethanol.

Ford buys parts for its hybrid vehicles from Aisin Seiki, a supplier that is
partly owned by Toyota and part of its global network of parts-making
companies. Ford and Aisin have had disputes over the number of parts Aisin
was willing to make available for Ford vehicles.

Mulally is a student of the Toyota production system and used a form of it
on assembly lines at the Boeing, where he was head of the commercial
airplanes division before joining Ford in September.

Mulally and Fields flew from the United States to Japan and returned
immediately afterward, people with direct knowledge of their trip said
Tuesday. During an interview Friday, Mulally gave no hint that he had made
the trip, which is a round-trip flight lasting about 24 hours.

The long journey reflects the value Mulally places on Ford's relationship
with Toyota, according to a company officer with knowledge of his views.
Only a year ago, Bill Ford Jr., then Ford's chief executive, sounded a more
competitive note.

"My goal is to fight Toyota and everybody else and come out on top," Ford
said during an interview with Time magazine, adding: "I'm not ceding
anything to Toyota. They're an excellent company, and they're a terrific
competitor, but I look forward to taking them on."

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