26 September 2011

The VW-Suzuki Fall Out


Two years ago VW bought a 20% share of Suzuki and Suzuki a 1.5% share of VW. Why? Suzuki is strong in both small car manufacturing and the Asia region - especially India, things that VW could benefit from. Suzuki could gain from power train technology and perhaps larger car making, areas that Suzuki lag in.

Now Suzuki has agreed to buy from Fiat some diesel engines, something VW says breaches the terms of its joint agreement. Suzuki says it does not. VW says pull out of the deal, but Suzuki says it would be too costly to do so. Suzuki now wants out of the alliance, with both sides buying out of the cross share arrangement. VW has not wish to do so. Suzuki also wants VW to retract its allegation of breaching its agreement because it hurts Suzuki's reputation.

In reality it is hard to see what has been achieved in the last two years of this tie up, as it seems little or nothing has been shared. Also, the problem with any alliance is deciding whether is it an equal partnership, or is one going to be the dominant partner. I think Suzuki saw it as the former, while VW the latter. It will be interesting to see where it will end.

In summary: German bossiness meets Japanese pride...ouch.

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