Toyota, Subaru to co-develop sports car -paper

TOKYO, Aug 10 (Reuters) - Toyota Motor Corp. (7203.T: Quote, Profile, Research, Stock Buzz) and Subaru-maker Fuji Heavy Industries Ltd. (7270.T: Quote, Profile, Research, Stock Buzz) are finalising plans to co-develop a sports car under the Toyota brand as part of their recently formed alliance, the Asahi newspaper reported on Friday.

The new car, to be priced under 2 million yen ($16,900) with an engine displacement of less than 2 litres, may use Subaru's signature symmetrical all-wheel-drive powertrain, the paper said, without citing sources.

The partners aim to sell the car in 2010, and finalise details of the joint development by autumn.

Both companies said they could not discuss future product plans.

Toyota, the world's biggest automaker, took an 8.7 percent stake in Fuji Heavy in late 2005, aiming to tap the latter's unused production capacity in the United States and find areas of joint development.

Industry watchers had been especially keen to see whether Toyota would make use of Fuji Heavy's flat-four engine, a trademark technology found only in Subaru and Porsche (PSHG_p.DE: Quote, Profile, Research, Stock Buzz) cars.

Executives at both companies have been cagey about the possibility but have indicated that doing so made little sense since it could dilute Subaru's niche brand.

Toyota ended production of its last sports car, the MR-S, last month due to weak sales.