Toyota Motor could make a handy tune-up with a buyout of Daihatsu Motor. The world's biggest carmaker is considering taking out minority shareholders in its $5.4-billion subsidiary, in what amounts to a sensible bit of house-keeping. A bolder follow-up would be to take control of affiliate Subaru.
Responding to a report in Japan's Nikkei newspaper, Toyota says it constantly ponders its relationship with Daihatsu, of which it owns slightly more than half. That includes thinking about partnerships or a restructuring leading to whole ownership.
A full buyout would be a long way from transformational for Toyota, whose own market value exceeds $190 billion. However, it would still eliminate inefficiencies. While Daihatsu's focus on mini-vehicles caps profitability, greater purchasing power and cutting overlaps would help Toyota lift the unit's nine per cent EBITDA margins closer to the group's 15-per -cent-odd level. Plus small cars, vital to any push deeper into emerging markets, are something of a weak spot at Toyota.
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Moreover, a share swap would be a good way to soak up some of Toyota's huge store of treasury stock, which as of end-September was equivalent to nearly nine per cent of its outstanding shares.
Further out, Toyota could try some bolder dealmaking. On January 27 both it and Suzuki Motor roundly denied reports of a tie-up - no surprise given the fiercely independent Suzuki has just extricated itself from a failed alliance with Volkswagen, and competes head-on with Daihatsu in Japan's small "kei" car market.
A better option could be to buy Subaru from Fuji Heavy Industries. Toyota already owns 16.5 percent of Subaru, which has transformed itself into something approaching the Japanese Volvo: making rugged SUVs that sell well in North America. Not something you can say of Daihatsu's tiddlers.
