Japanese electronics supplier Sanyo Electric Co. Ltd. (6764.TO) said Wednesday it will team up with Dutch car navigation system maker TomTom NV (TOM2.AE) to tap into potentially lucrative growth in North America and European markets as the auto industry shows signs of recovery while other Sanyo businesses suffer from weak consumer demand.

In a statement, unprofitable Sanyo, which makes a range of consumer electronics products, said along with its Dutch partner it will develop and produce navigation systems for sale to auto makers by the end of 2010.

Osaka-based Sanyo declined to disclose financial terms of the deal, nor give sales targets.

Sanyo also declined to say how much it earned from its car navigation business in Japan, where it started making navigation systems in 1993.

Sanyo said that while navigation systems built into vehicles are commonplace in its home market, portable navigation devices such as those produced by TomTom, often fitted separately to cars after they're sold, are more popular in Europe and North America.

With little likelihood of any short-term benefit form the TomTom deal for Sanyo's bottom line, Tokyo investors were largely unmoved by the news. The shares closed 2.5% higher on the day at Y254, in line with gains by electronics peers, having traded at Y252 just before the news was disclosed. The Nikkei index ended the day 0.5% higher.

The deal comes as Sanyo, in the process of being taken over by local peer Panasonic Corp. (6752.TO) in a $9 billion deal, chases growth markets to help meet its target of breaking even in the fiscal year through March 2010. It recorded a net loss of Y92.3 billion in its latest fiscal year ended March.

As part of its efforts to concentrate on a lucrative new business, Sanyo is also seeking to solidify its position as the world's biggest maker by volume of rechargeable batteries including lithium-ion batteries for autos.

As the demand for environmentally friendly hybrid electric-gasoline vehicles grows, suppliers of lithium-ion batteries - more efficient and lighter than previous technology - expect to cash in.

 
   -By Yuzo Yamaguchi, Dow Jones Newswires, +813 6895 7563; yuzo.yamaguchi@dowjones.com

(Kenneth Maxwell contributed to this story.)