Suzuki broke partnership deal by buying Fiat engines, says VW

Suzuki broke partnership deal by buying Fiat engines, says VW

Berlin: Volkswagen AG said Suzuki Motor Corp. broke the rules of a cooperation agreement by deciding to purchase engines from Fiat SpA and has given the Japanese car maker several weeks to remedy the alleged infringement.

Volkswagen considers this step regrettable, but necessary, and has offered to discuss the matter with Suzuki, the Wolfsburg, Germany-based company said in a statement on Sunday.

The two companies have been at odds since March when Volkswagen said in its annual report that it could significantly influence financial and operating policy decisions at Suzuki, describing the Japanese company as an associate. Suzuki in June decided to buy diesel motors from Italy’s Fiat for cars built in Hungary.

Osamu Suzuki, the Hamamatsu City, Japan-based company’s chairman, said in a Bloomberg interview published on Tuesday that the two companies weren’t speaking. The public feud has brought to a halt Volkswagen’s efforts to turn a 222.5 billion yen ($2.9 billion) investment into an operational alliance. The partnership was meant to combine Suzuki’s leading position in India, Asia’s second fastest growing major economy, with Volkswagen’s global reach as the world’s third biggest car maker.

This is the latest setback in a so-called partnership that has been developing anything but well, Juergen Pieper, an analyst at Bankhaus Metzler in Frankfurt who recommends buying Volkswagen stock, said on Sunday by phone. “The two sides have quite a bit of work to do to set aside tensions and focus on business."

Suzuki spokespeople weren’t immediately available to comment on Volkswagen’s statement outside normal business hours.

When the deal was signed in December 2009, with Volkswagen taking a 20% Suzuki stake, the companies said they intended to cooperate on technology, including hybrids and electric cars, and expansion in emerging markets. Nearly two years later, no joint projects have begun.

Volkswagen, which forecasts deliveries will rise 5% this year after selling 7.2 million vehicles in 2010, aims to surpass Toyota Motor Corp. and General Motors Co. as the world’s largest car maker by 2018 and is targeting India as an expanding market to boost sales. Suzuki, which sold 2.64 million cars in its last fiscal year, delivered 1.13 million of those vehicles in India. Volkswagen sold 53,300 cars in the country in 2010.

Osamu Suzuki hasn’t found any Volkswagen technologies he’d like to adopt following an extensive review of what they have to offer, he wrote in a Nikkei newspaper column in July. Suzuki in July also said the auto maker was open to forming alliances with others.