ISUZY Isuzu Motors Ltd (PK)

Isuzu Motors Ltd. (7202.TO) is considering various partners for possible tie-ups, including Germany's Volkswagen AG (VOW.XE), to better expand its global reach, especially in emerging markets.

The Japanese truck maker said Friday it is considering a wide range of possible tie-ups in with potential partners, including Volkswagen, but no decision had been made.

"It's hard to do everything by ourselves to allow strengthening of our sales activities and product lineup," said a company spokesman. "That prompted us to study a variety of possibilities for tie-ups," he said without elaborating.

Investor hopes are high that a more substantial capital alliance with a global auto company could help Isuzu expand in such red-hot overseas markets as China and India to offset sluggish demand at home.

Isuzu, in which Toyota Motor Corp. (7203.TO) owns a 6% stake, remains the only independent truck maker based in Japan.

Most Japanese truck makers have been operating under the umbrellas of bigger peers. Hino Motors Ltd. (7205.TO) is a subsidiary of Toyota, while Mitsubishi Fuso Truck and Bus Corp. is owned by Daimler AG (DAI.XE). UD Trucks Corp. is the Japanese truck-manufacturing unit of AB Volvo (VOLV-B.SK).

On the Tokyo Stock Exchange, investors gave the company's shares received a warm reception. The issue was 1.8% higher at Y340 midday after gaining to intraday high of Y344.

"For Isuzu, it's positive in the sense that it can expand its sales network for engines and likely reflects its desire to secure other channels in addition to Toyota," said Yoshihiro Okumura, general manager at Chibagin Asset Management.

While the scenerio is denied by Isuzu, Okumura said an ideal and realistic framework for future capital ties would be for the Japanese truck maker and Volkswagen to acquire stakes in each other that are small enough for Isuzu to maintain a favorable relationship with Toyota.

Isuzu's comments come after the Nikkei reported Friday that it has been negotiating with Volkswagen for a tie-up involving the mutual supply of truck engines and related technologies.

The report said the two firms will soon sign a confidentiality agreement and enter into full-scale talks with an eye toward signing a deal this autumn. Depending on how the negotiations proceed, they will also consider acquiring stakes in each other, the report said.

But Isuzu said there was no truth to the report that the two companies will consider mutual shareholding.

-By Hiroyuki Kachi, Dow Jones Newswires; 813-6269-2789; Hiroyuki.Kachi@dowjones.com

(Kana Inagaki contributed to this article)

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