No More Suzuki, Volkswagen Association?

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No More Suzuki, Volkswagen Association?

Posted September 13 2011 08:30 AM by IAG_Staff 
Filed under: Industry News, Suzuki, Volkswagen

Splitting Upjpg

The biggest divorce is not found in Hollyweird this time.

Suzuki initiated the divorce proceedings, straight from 81-year old chairman Osamu Suzuki’s mouth. Taking the diplomatic route, he suggested that the two companies should “say goodbye with a smile.” At an earlier Tokyo press conference though, he had compared them to a “ball and chain for Suzuki management.”

The fact that Volkswagen and Suzuki even had an alliance is news to many, since nothing really ever came of it. Volkswagen had bought a 20-percent stake in Suzuki back in December of 2009, seeking to gain a foothold in the Indian small-car market where Suzuki has dominated for decades. In return, Suzuki would get access to technology that it couldn’t develop itself, such as hybrids and electric cars.

But while the sensible Germans made for solid marriage material, Suzuki had already shacked up with Fiat. Since 2005, the two had been producing diesel engines in Asia, but they recently took their relationship to the next level when Suzuki started buying diesel engines from Fiat’s Hungarian arm, expanding the agreement that the two shared.

Volkswagen viewed the expansion as a breach of its contract with Suzuki. To make matters worse for Suzuki, Volkswagen had not thought of Suzuki as a “merger of equals,” but instead labeled the Japanese automaker an “associate,” believing it could “significantly influence financial and operating policy decisions.”

Suzuki’s vice president Yasuhito Harayama compared these accusations to a declaration of war — a statement that seems to write its own obvious jokes. The Fiat alliance had been in place for a long time, he argued, and that as Volkswagen couldn’t provide a similar engine, there was no conflict.

As a result, the two companies have put their market alliance on hold, which doesn’t really seem to matter, as it never produced anything in the first place. In a column penned by Osamu Suzuki in a Japanese newspaper, he wrote that Suzuki is open to forging an alliance with other companies. And the relationship with Fiat and its diesel engines is still ongoing.

Volkswagen doesn’t intend on selling its stake in Suzuki. Like a newly divorced dad, it still wants to see the kids every once in a while. It still views its stake as “an attractive investment,” even if both companies’ committees are ready to go at each other’s throats. Why would Volkswagen wants to stick with this failing relationship? In 2010, Suzuki sold 1.13 million cars in ever-growing India. The Germans? Just 53,300.

via Automotive News (Subscription required) courtesy of 

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