The report comes just days after money-losing GM said12 facilities by 2008 and cut 30,000 jobs in a move that will slash the number of vehicles it is able to build in North America by about 1 million a year.
The combined developments could help Toyota surpass GM in worldwide production, although it's unclear if that will happen because Detroit-based GM is growing rapidly in Asia.
Toyota expects to produce 8.1 million vehicles this year, while GM expects 9 million, according to Greg Gardner of Harbour Consulting, a manufacturing consulting firm.
Toyota will also chip away at GM's lead with a new pickup truck plant scheduled to open next year in San Antonio, Texas, that will add an additional 200,000 vehicles to Toyota's annual capacity. The Japanese company's output will be boosted by another 100,000 vehicles in 2008, when Toyota's new RAV 4 plant comes online in Canada.
Under the latest expansion plans, the world's No. 2 automaker has asked Fuji Heavy Industries, maker of Subaru autos, to start building Toyotas in 2007 at a Lafayette, Indiana, factory operated by Fuji Heavy's wholly owned subsidiary, Subaru of Indiana Automotive, the Asahi newspaper reported Wednesday, without citing sources.
Company representatives were not available for comment Wednesday, a national holiday in Japan.
Ann McConnell, a spokeswoman for Subaru of Indiana, said Fuji Heavy Industries and Toyota Motor Corp. have been in discussions, but that there has been no word of a decision yet.
Lafayette Mayor Tony Roswarski also said there had been no final decision, but that the city has been working with Toyota and Subaru of Indiana. He said a "considerable amount of study" will have to be done before a decision is made.
"We are certainly hopeful that the Lafayette site is chosen," he said.
The newspaper said there were five to six candidate models for production, with the number manufactured annually to gradually increase to 100,000 vehicles. Earlier reports have suggested that Toyota might produce hybrid vehicles at the Fuji plant.
The Indiana plant produced nearly 120,000 Subaru models last year.
It wasn't immediately clear if Subaru production would be reduced or what the factory's total vehicle output would be.
Fuji Heavy teamed up with Toyota in October after ending a five-year tie-up with GM, which sold its 20 percent in the Japanese company. Toyota, based in Toyota City in central Japan, bought a 8.7 percent stake from GM for about $315 million to become Fuji Heavy's top shareholder.
GM lost almost $4 billion in the first nine months of this year, hit by falling sales and rising health care costs. Its share of the U.S. market has shrunk to 26.2 percent from 33 percent a decade ago.
Toyota, by contrast, is on pace to set a fourth straight year of record profits.
Both GM and Ford Motor Co., the world's third-biggest automaker, are seeing their U.S. market share dwindle at the expense of Toyota and other Asian competitors. Toyota, Nissan Motor Co. and Honda Motor Co. are all reporting healthy earnings bolstered by their reputation for well-built, fuel-efficient cars at a time of surging gas prices.
GM's tie-up with Fuji was largely deemed a flop. But access to Fuji's plants could help Toyota boost production at a time of soaring sales, analysts say, although Fuji has only the one plant in North America, so additional capacity will be limited.
Completed in 1988, the Indiana factory was built under a joint-venture agreement between Fuji and Isuzu Motors Ltd. Fuji bought out Isuzu's share in the venture and became sole operator of the plant in 2003.
After GM's latest cost cuts, the company will be able to build about 4.2 million vehicles a year in North America, down 30 percent from 2002. Toyota is expected to have North American capacity of about 1.81 million cars by then, up from 1.44 million vehicles last year, Toyota spokesman Dan Sieger said Monday.
China is one bright spot for GM, which said last month that sales there rose 27.8 percent in the first three quarters of the year to 472,468 vehicles. Growth was fueled partly by a mini-vehicle joint venture with Shanghai Automotive Industrial Corp. (SAIC) and Wuling Automotive.
GM and Toyota have a long-standing partnership to share environmental technology, and they run a car assembly plant in California together, although the ties do not involve holding stakes in each other.
Out of concern for GM's plight — and possibly to stave off an anti-Japanese backlash by American consumers — Toyota Chairman Hiroshi Okuda suggested earlier this year that Toyota should raise the price of car models in the United States to level the playing field.
Toyota raised prices soon after, but denied the move was to placate U.S. automakers.