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Strategic Alliance: Volkswagen To Buy 20% Stake In Suzuki

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All those rumors about a VW/Suzuki tie-up are now official: Volkswagen AG will purchase a 20% stake in Japan's Suzuki Motor Corporation at a cost of ¥222.5 ($2.5 billion). To return the favor -- and to provide some parity to the deal -- Suzuki will also buy a stake in Volkswagen, at a price estimated to be about half the sum that VW antes up.

This arrangement should serve both companies well. It's no secret that the Asian auto market has serious growth potential, and Suzuki and Volkswagen can leverage one-another to earn larger share across the continent. For example, Suzuki can help Volkwagen in India, where it does particularly well, and Volkswagen can give Suzuki a leg-up in China, where VW sales are strong.

Suzuki -- which has had trouble maintaining a foothold in auto markets like the U.S. -- has more to gain from the partnership, and it will no doubt benefit from the stability that a large auto company like VW can offer. Volkswagen and its sizable resources will also help Suzuki remain competitive on the production and technology fronts. Said Suzuki, "The world automotive industry is in the midst of significant changes.... It is difficult to adapt to these numerous issues on our own."

Combined sales of the two companies will likely outpace those of Toyota, which is currently the world's #1 automaker. The tie-up should be completed by mid-February 2010.

[DetNews]

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