DETROIT -- Ford Motor Co. and Toyota Motor Corp., by partnering to build a hybrid system for light trucks, hope to cross one of the auto industry's biggest hurdles – significantly boosting the fuel economy of large pickups and SUVs.
The two automakers plan to jointly develop hybrid technology for light trucks as U.S. regulators finalize plans to toughen fuel economy requirements for pickups later this decade.
Ford sells the F series, the best-selling large pickup in the United States. Toyota is the world's biggest marketer of gasoline-electric hybrid vehicles for front-wheel based light vehicles, with sales of 3.3 million since introducing the Prius in 1997.
"We expect to create exciting and socially beneficial technologies with Ford, and we can do so because our two companies have enough experience to create a synergy effect in hybrid technology," said Takeshi Uchiyamada, a Toyota executive vice president.
The new hybrid system will be introduced in Ford and Toyota rear-wheel drive SUVs and light trucks later this decade.
It's the first time the automakers have collaborated on product development.
The companies have signed a memorandum of understanding and expect a formal agreement to be signed next year.
By that time, it should be clear how the Obama administration will formalize a proposal to hike corporate average fuel-economy standards to 54.5 mpg by the 2025 model year -- doubling the current requirement.
The new standard requires a 5 percent annual increase in fuel economy for cars starting with the 2017 model year through the 2025 model year. Under current law, automakers' fleets must improve to 35.5 mpg in the 2016 model year, up from 27.3 mpg now.
The plan for 5 percent annual increases could be changed if a midcourse review, planned to begin in 2018, determines that it would adversely affect industry costs and vehicle sales.
The Obama administration's current CAFE proposal, details of which still must be worked out, will exclude full-sized pickups from any increases from the 2017 model year through the 2019 model year.
Beyond 2019, annual increases would begin at a rate still to be determined, until they reach an annual rate of 5 percent a year in the 2022-2025 model years.
Light trucks other than full-sized pickups would have to achieve 3.5 percent annual increases in mileage standards in the 2017-21 model years and 5 percent increases in the 2022-25 model years.
The sharp hike in fleet mpg will force automakers to make vehicles smaller and lighter, offer more hybrids and enhance powertrains to include such technologies as turbochargers and direct injection.
Detroit automakers dominate the full-sized pickup market, with the F series and General Motors' Chevrolet Silverado ranking as the top-selling vehicles in the nation.
Some Toyota Tundra and Nissan Titan models also might be considered full-sized pickups under federal criteria to be determined.
Credits for hybrids
Under the current White House plan, which is to be proposed formally in September and become final in July 2012, Detroit automakers would receive credits for meeting CAFE targets by increasing the use of hybrid technology in pickups.
The exemption for full-sized pickups was opposed by some overseas automakers -- notably Volkswagen AG and Daimler AG -- that make SUVs and crossovers that are classified as light trucks but would not be treated the same.
Administration official say one reason for the special treatment of full-sized pickups is that they were "significantly challenged" to meet the 2012-16 mileage targets.
Because of the wide choice of engines, transmissions, drivetrains, bed sizes and towing capacity available, automakers have struggled to meet higher fuel-economy requirements for large pickups without sacrificing consumer preferences.
That challenge is the primary reason Ford and Toyota have decided to pair up, analysts say.
GM has marketed mild-hybrid full-sized pickups and SUVs for several years under a technology partnership with BMW and Chrysler, but sales have been lackluster because of higher sticker prices and reduced performance, such as limited towing capacity.
"To some extent, this agreement allows Ford to cost-effectively catch up and potentially surpass GM, who arguably has a head start on light-truck hybrids and mild hybrids," Barclays Capital analyst Brian Johnson said in a report today.
Ford and Toyota expect the partnership to reduce costs and bring hybrid technology to the marketplace sooner and at a lower price. The companies plan to develop components as equal partners but integrate the new hybrid system in future trucks and SUVs separately.
"By working together we will be able to serve our customers with the very best affordable, advanced powertrains, delivering even better fuel economy," Ford CEO Alan Mulally said in a statement. "This is the kind of collaborative effort that is required to address the big global challenges of energy independence and environmental sustainability."
The two automakers also agreed to work together on developing next-generation telematics and other in-vehicle Internet-based services.
"This agreement brings together the capability of two global leaders in hybrid vehicles and hybrid technology to develop a better solution more quickly and affordably for our customers," said Derrick Kuzak, Ford's vice president of product development.
The companies did not release financial details or identify which vehicles will be involved.
But investors seemed to welcome the news, pushing Ford shares higher in New York Stock Exchange trading today while shares in other automakers slumped. Ford shares closed up 1 cent at 10.01. GM shares fell 44 cents, or 2 percent, to close at $21.72.
The Ford and Toyota product development teams first met in April, Kuzak said.
The next step of the project is a feasibility study, which will begin soon, to determine the scope of the collaboration, he said.
Uchiyamada, speaking through a translator, said both companies are eager to start. While they "would like to know the timing now," they must take the appropriate steps before full development can begin.
They play to begin development work next year.
Ford and Toyota previously collaborated in 2004 when the two companies agreed to a patent-sharing deal where Toyota licensed some of its hybrid technology to Ford.
Ford used the licensed technology in the Escape Hybrid and the now-defunct Mercury Mariner Hybrid. In return, Toyota obtained the use of Ford's diesel and direct-injection engine technology.
Neil Roland contributed to this report
To read Ford's press release, click here.
To read Toyota's press release, click here.