VW, Suzuki Alliance Hits The Skids

September 12, 2011


The estranged partnership between Volkswagen and Suzuki has hit the skids, as Suzuki is now asking Volkswagen to sell its stake in the company, and has promised to sell its own small percentage of the German auto giant.

In 2009, VW purchased a 19.9-percent, $2.9-billion stake in Suzuki, in the hopes of creating a deeper global alliance that would give Volkswagen coverage in city cars and in emerging markets like India. In return, Suzuki would have access to VW's immense parts bin, from which it could develop new vehicles to replace its lineup in many markets, including the U.S. market.

The alliance has shown almost no results, and for the past few months, the partners have been bickering behind the scenes. Earlier this summer, the Wall Street Journal reports, Suzuki chairman Osamu Suzuki wrote on a company Web site that Suzuki "had found nothing it wanted" from its German partner.

This weekend, Volkswagen informed Suzuki that a recent diesel-engine deal between the Japanese company and Italy's Fiat violated the alliance agreement. It gave its erstwhile partners a few weeks to rectify the situation. In a statement, the automaker said it was "serving notice of an infringement by Suzuki of the cooperation agreement," but did not clarify how it would proceed legally.

This morning, Suzuki is reported to have asked VW to dump its stake in the company, and has promised to sell its own shares in VW, which amount to 1.49 percent of the German company.

According to a report in Automotive News, Volkswagen says it has no interest in selling its Suzuki shares.

Suzuki sold nearly 2.6 million vehicles worldwide last year, while Volkswagen topped the 7-million mark. Volkswagen is on an ambitious expansion in America with production of the Passat sedan in Tennessee joining North American assembly of the Jetta sedan and Beetle coupe and convertible. Suzuki has struggled to maintain a mass-market brand in the States with vehicles like the well-received Kizashi sedan, the SX4 subcompacts and the Nissan Frontier-derived Equator pickup.

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