The Japanese auto industry took a step towards consolidation yesterday with the agreement by Toyota, Fuji Heavy Industries and Daihatsu to extend their co-operation in research, development and product supply. Under the agreement, Toyota and FHI will jointly develop a compact sports car, which is set to hit the market by the end of 2011 and will be powered by an engine using FHI's core technology. To cement the strengthened alliance, Toyota will increase its stake in FHI from 8.7 per cent to 16.5 per cent.