Toyota Motor Corp and Ford Motor Co will work together to develop hybrid trucks and SUVs that will be ready for market by the end of the decade, the two companies said on Monday.

Ford and Toyota plan to collaborate on product development for the future rear-wheel drive hybrid vehicles, as well as for telephone, Internet and entertainment systems.

Developing the hybrids will help each automaker meet stringent U.S. fuel economy standards in coming years, said Takeshi Uchiyamada, vice president for Toyota research and development, and Derrick Kuzak, Ford's product development chief.

There are no plans for collaboration beyond rear-wheel drive hybrids and on-board phone, navigation and entertainment systems, Kuzak said.

Toyota has been the world leader in hybrids since it introduced the Prius sedan in 1997. It has since sold 3.3 million hybrid vehicles. led by the Prius, which like most fuel-efficient cars, has front-wheel drive.

Rear-wheel drive vehicles in the U.S. market include sports cars and high-performance sedans.

This is the kind of collaborative effort that is required to address the big global challenges of energy independence and environmental sustainability, Ford Chief Executive Alan Mulally said in a prepared statement.

Toyota President Akio Toyoda, also in a prepared statement, said the tie-up should also become an important building block for future mobility in the U.S.

While Toyota has led in hybrid sales, Ford has been a leader in pickup trucks, which are predominately sold in the United States and Canada. Its F-series pickup trucks have been the best-selling vehicle in the U.S. market since the 1970s.

The two companies will work on the details of a fuller agreement expected sometime in 2012 that will lay out more specifically how they will collaborate, Kuzak said.

Costs and scope of the collaboration have not yet been worked out, Uchiyamada said, adding it was too early to tell if one company may bear more of the costs.

Uchiyamada led Toyota engineers in developing the Prius.

TOYOTA U.S. SALES WOE

The tie-up also comes at a time when Toyota faces tougher competition in the United States, its most important market.

It had risen to No. 2 in sales behind only General Motors Co in the U.S. market, but has since fallen behind Ford.

Toyota's U.S. sales fell 7 percent in the U.S. market through July. Toyota has been struggling to restore sales momentum in the U.S. market after the March earthquake in Japan forced production disruptions.

Ford's U.S. sales rose 12 percent in the first seven months of 2011.

By allying with Ford, Toyota is also taking aim at an area of vehicle technology where executives acknowledge that the Japanese automaker has lagged: on-board navigation and entertainment systems.

Ford won sales and consideration from young car shoppers with its Sync system, an option that allows drivers to control stereos and cell phones with voice activated commands. The follow-up system, MyFord Touch, proved to be less popular with the high-end buyers Ford targeted.

MULALLY, TOYODA MEETINGS

Ford CEO Mulally has long professed admiration for Toyota going back to his days as a Boeing Co executive when he studied and borrowed heavily from the Japanese automaker's lean production system.

Mulally and Toyoda have met several times since 2007, and set the groundwork for talks that began in April this year between teams led by Uchiyamada and Kuzak.

Early in his tenure at Ford, Mulally approached Toyota to seek a deal intended to speed Ford's turnaround.

Ford, led by Mulally, was able to go from losing money to profitability and develop a more diversified model lineup without that tie-in with Toyota.

When Mulally became Ford CEO in October 2006, the company was on its way to losing $30 billion from 2006 to 2008. Soon after his arrival, Ford borrowed heavily to fund a restructuring that helped it become the only Detroit automaker to avoid bankruptcy in 2009.

Ford in 2010 showed its best profit since 1999.

Both automakers face pressure from a resurgent GM, which is investing heavily in plug-in hybrid technology. Last week, GM announced plans for a second rechargeable hybrid based on the technology used in the first, the Chevy Volt.

Both Toyota and Ford have entered into previous collaborations to share technology and development costs.

Under Toyoda, the Japanese automaker has invested in Tesla Motors Inc and struck a deal to cooperate in producing an electric vehicle based on the RAV4 small SUV.

Ford works with GM to develop transmissions for the North American market, and with French automaker PSA Peugeot Citroen for development of some diesel engines in Europe.

On Monday afternoon, Ford shares were up 0.6 percent at $10.06 per share and Toyota's U.S. shares were down 0.2 percent at $70.53 per share after closing in Tokyo down 2.5 percent at 2,700 yen ($35.30) per share.

(Reporting by Bernie Woodall; editing by Derek Caney, Maureen Bavdek and Andre Grenon)

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