Toyota confirmed today it is increasing its stake in Fuji Heavy Industries (Subaru’s parent company) from current 8.7% levels to 16.5%. The auto-giant also announced plans to expand ties with Subaru and co-develop more models including a new RWD sports car. Currently, Toyota uses idle capacity at Subaru’s U.S. plant to build its Camry sedan but the future will see the two carmakers work on everything together, from swapping engineers to sharing hybrid technology.

Speaking at the announcement today, Toyota boss Katsuaki Watanabe said the ” alliance with Fuji heavy is a win-win situation.”

The new RWD model will be manufactured at a new plant to be set up by Fuji Heavy Industries and both Subaru and Toyota will market their own versions with unique badging. It will be based on a Subaru platform but Toyota will design its exterior, reports Automotive News.

According to previous reports, the car will likely feature a 2.0L boxer engine and come in both coupe and three-door hatch bodystyles. There could also be a high-performance version with a symmetrical AWD system and 300hp turbocharged engine.

Toyota also announced today that it will work closer with small-car specialist Daihatsu, which it owns a 51.19% stake in. Daihatsu already manufactures a range of compact ‘Kei’ cars – tiny Japanese runabouts with 0.6L three-cylinder engines – and it’s expertise will help Toyota with development of its upcoming iQ minicar due next year.