updated 12/26/2006 3:55:55 PM ET 2006-12-26T20:55:55

The chief executive of Ford Motor Co.  met with the chairman of Toyota Motor Corp. as the first step in potential partnership negotiations, the Japanese business daily Nihon Keizai Shimbun said Tuesday.

The newspaper reported in its online edition that Ford CEO Alan Mulally and Toyota’s Chairman Fujio Cho met last week. The meeting was also attended by Ford Executive Vice President Mark Fields, who is in charge of restructuring the automaker’s loss-making North American operations, the newspaper said.

The newspaper cited unnamed sources familiar with the talks as saying that Ford was interested in Toyota’s hybrid and fuel-cell technologies as well as its work in reducing manufacturing and parts procurement costs.

A spokesman for Ford said the automaker would neither confirm nor deny the report.

“I can’t confirm or deny the report other than to say that we have discussions with participants in our industry all the time,” Ford spokesman Oscar Suris said.

A Toyota spokesman for the company’s U.S. sales operation also declined comment, saying any comment would have to come from the automaker’s headquarters in Japan.

Ford shares were up 1.2 percent, or 9 cents, at $7.51 on the New York Stock Exchange on Tuesday afternoon.

The report said Toyota could be considering a partnership as a way to ease potential friction with the U.S. auto industry at a time when its own growth has been surging.

Analysts were skeptical that Toyota and Ford would agree to an outright merger or a substantial joint investment given the diverging paths for the two automakers.

Toyota is poised to overtake General Motors Corp. as the world’s largest automaker in terms of production next year, and many analysts expect it will also unseat Ford as No. 2 in the U.S. market as soon as next year.

While Toyota’s U.S. sales have jumped by almost 13 percent this year, Ford’s sales have fallen by almost 8 percent, according to monthly sales data.

Ford’s Mulally, who took over as Ford CEO in October with a mandate to turn the struggling company around, has spoken repeatedly about his admiration for Toyota, a company he has said he studied closely as a manufacturing executive at Boeing Co.

Ford currently licenses Toyota’s market-leading hybrid engine technology for the hybrid versions of its Escape and Mariner sport utility vehicles.

Ford, which has relied heavily on its line-up of trucks and SUVs, would stand to gain from a cooperative partnership with Toyota if it focused on fuel economy and other technology seen as environmentally friendly, said Edmunds.com analyst Jesse Toprak.

“In terms of long-term planning, I think it’s very smart for Ford to be looking at this,” Toprak said. “This is going to be a factor that will determine whether an automaker is successful in the future.”

Efraim Levy, an equity analyst at Standard & Poor’s, agreed,

“Toyota could teach Ford a lot in any kind of joint venture ... suggestions on improving manufacturing efficiencies or sharing technologies,” he said. “The benefits that would accrue to Toyota are less obvious.”

He added: “I don’t think any major transaction is going to occur between them. It’s probably just going to be technology sharing.”

The possible partnership is the latest in a series that have captured headlines for the global auto industry in recent months.

GM declined to enter an alliance with Nissan-Renault in early October after three months of negotiation, sparking speculation that the French-Japanese auto group could turn to Ford to secure a North American partner.

Carlos Ghosn, who heads both Renault SA  and Nissan Motor Co., said last month that he was open to adding a U.S. automaker to form a three-way alliance, but said the timing was not right for Nissan.

Copyright 2012 Thomson Reuters. Click for restrictions.

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