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Suzuki tells VW to retract claim it breached contract

Suzuki tells VW to retract claim it breached contract
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First Published: Thu, Sep 22 2011. 04 46 PM IST
Updated: Thu, Sep 22 2011. 04 46 PM IST
Tokyo/Frankfurt: Suzuki Motor Corp demanded that Volkswagen AG publicly retract a claim that the Japanese car maker had violated their contract, stepping up a war of words as it tries to break off equity ties with its estranged partner.
Suzuki, Japan’s fourth-largest automaker and owned 19.9% by Volkswagen, said it sent a letter on Thursday in chief executive Osamu Suzuki’s name addressed to his German counterpart, Martin Winterkorn.
Suzuki gave Volkswagen until 30 September to revoke its statement that Suzuki had breached their pact by agreeing to a diesel engine deal with Italy’s Fiat, saying its reputation had been significantly damaged by the statement.
It did not say what the consequences would be if the deadline was not met. “Suzuki never breached our agreement,” CEO Suzuki said in a statement.
“This partnership did not bring us the benefits we expected but turned out to be a ‘ball and chain’ for our managerial independence,” he said.
A Volkswagen spokesman said the company had no immediate comment on the matter.
Suzuki has been on the offensive since July, when the octogenarian CEO touched a nerve by questioning in a blog Volkswagen’s intention of being an equal partner, as had been agreed when they sealed their equity tie-up in December 2009.
Behind Suzuki’s attack was a seemingly innocuous decision by Volkswagen to classify the Japanese car maker as an “associate” in its 340-page annual report. The accounting term is typically reserved for holdings of at least 20% in which VW can “significantly influence financial and operating policy decisions”.
Volkswagen initially tried to smooth over the rift by arguing it never intended offence in its apparent overstatement of its control over Suzuki.
But on 11 September, it accused Suzuki of violating their agreement, prompting Suzuki’s CEO to call a news conference in Tokyo the following day to publicly seek a breakup.
Suzuki offered to buy back at market prices the shares that Volkswagen owns, to end an alliance that has failed to bear any fruit after almost two years.
In Thursday’s letter, Suzuki said it rebutted Volkswagen’s allegation by arguing that it had informed Volkswagen in January of its decision not to use its partner’s diesel engines. Upon Winterkorn’s request for a written notification, Suzuki complied within a few days, it said, after which the decision was also confirmed by engineers from both sides.
Volkswagen’s purchase of its stake in Suzuki for $2.5 billion in December 2009 was welcomed by investors as it promised VW an inside track into Suzuki’s leading small-car technology while giving Suzuki access to VW’s hybrid technologies.
“I believe that with this (letter), Volkswagen will understand why Suzuki wants to dissolve the partnership and equity alliance,” CEO Suzuki said in the statement.
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First Published: Thu, Sep 22 2011. 04 46 PM IST
More Topics: Suzuki | VW | Carmaker | Auto | Contract |