Toyota to buy into Subaru

[SSbaby]

TOKYO (Reuters) - Toyota Motor Corp. is to buy an 8.7 percent stake in fellow Japanese automaker Fuji Heavy Industries Ltd. (7270.T: Quote, Profile, Research) from General Motors Corp. (GM.N: Quote, Profile, Research), which will dissolve its ties with Fuji, the companies said on Wednesday.

The transfer of shares in the maker of Subaru cars reflects a symbolic shift in the balance of power within the global auto industry as Toyota (7203.T: Quote, Profile, Research) threatens to unseat the embattled U.S. auto giant as the world's biggest carmaker by sales.

GM, which bought its 20 percent stake in Fuji Heavy in late 1999, has been struggling to strengthen a balance sheet weighed down by huge pension and health care liabilities and address sliding U.S. sales as competition from Asian brands intensifies.

Analysts had questioned the value of the Fuji Heavy-GM alliance as Subaru battles its own drop in sales and strategic cooperation between the two has remained thin.

GM said Toyota would buy 68 million of its Fuji Heavy shares at 520 yen each, for a total 35.36 billion yen ($309 million) in cash. The U.S. automaker could do with the money as its financing costs grow following the downgrade of its debt to junk status this year by three top rating agencies.

GM will divest its remaining 11.4 percent stake in Fuji Heavy by offering the shares into its partner's open-market buy-back of 90 million shares over the next three days.

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