Suzuki signals rift with Volkswagen over partnership

Suzuki signals rift with Volkswagen over partnership

Hamamatsu: Relations between Suzuki Motor Corp and Volkswagen AG’s have soured, with an executive at the Japanese automaker saying on Monday the two needed to go back to the drawing board on their multi-billion-dollar partnership.

VW’s purchase of a near-20% stake in Suzuki for $2.5 billion in December 2009 was welcomed by investors who expected Volkswagen to gain an inside track into Suzuki’s leading small-car technology, while Suzuki would have access to Volkswagen’s hybrid and other advanced technologies that it would not be able to afford on its own.

More than 18 months on, however, no progress has been made, a fact Suzuki executive vice president Yasuhito Harayama blamed on Volkswagen’s notion it could wield influence over Suzuki’s management.

“It was made very clear when we tied up with Volkswagen that we did not want to become consolidated, and that we would remain independent," executive vice president Yasuhito Harayama, in charge of relations with Volkswagen, told reporters in an interview with Suzuki’s four new executive vice presidents on Monday.

“We feel we need to return to the starting point, including over the ownership ratio," said Harayama, a former bureaucrat at Japan’s economy and trade ministry hired by Suzuki two years ago.

“The understanding that we are independent companies, and equal partners, is the absolute prerequisite in pursuing any specific cooperation."

Numerous reports since late last year have suggested Volkswagen was looking to bring Suzuki, Japan’s No.4 automaker, under its control.

Harayama also said Volkswagen had classified Suzuki in its annual report as a company consolidated under the equity-accounted method over which it could have “great influence".

Suzuki chief executive Osamu Suzuki had insisted at the time of the deal on being equal partners, limiting Volkswagen’s stake to 19.9%. Suzuki has been gradually buying shares in the German automaker as part of the cross-shareholding agreement.

No project with VW now

Harayama’s remarks echoed the views expressed by CEO Suzuki in a recent blog, published on the Nikkei newspaper’s online site.

“The two companies’ sizes differ vastly in size, so maybe with the passage of time they get the misguided notion that they have brought Suzuki under the VW umbrella," the outspoken 81-year-old CEO wrote in the blog, published on 1 July.

Having perused Volkswagen’s technologies, the automaker “found nothing that it wanted right away", Suzuki also said the blog. In a back-handed compliment, Suzuki goes on to say he was “relieved" that Volkswagen had reportedly made progress in developing a low-cost car without Suzuki’s help for South America and India.

Volkswagen, Europe’s largest automaker, has ambitious plans to overtake Japanese rival Toyota Motor as the world’s No.1 player by 2018.

Harayama stressed there were other automakers who were willing to work with Suzuki on an equal footing, and that Suzuki would continue to pursue operational tie-ups with a broad range of companies while holding back on any projects with Volkswagen until the two can reaffirm their initial understanding.

“Right now, there is no specific joint development project going on with Volkswagen," Harayama said.

Last month, Suzuki announced a deal to buy 1.6-litre diesel engines from Italy’s Fiat for a car to be built in Hungary -- a deal that both Suzuki and Harayama said proved the automaker could do without Volkswagen.

After an initial spike, Suzuki shares have lost ground since the Volkswagen deal, falling as much as a quarter to current levels around ¥1,827 and underperforming the broader market. Japanese markets were closed on Monday.