Suzuki plans to go it alone after ending four-year Volkswagen dispute2 min read . Updated: 31 Aug 2015, 12:52 AM IST
Volkswagen will sell its 19.9% holding after the arbitrators upheld tSuzuki's request to end the cooperation
Tokyo/Berlin: Suzuki Motor Corp., stung by its failed cooperation with Volkswagen AG, plans to defend its hard-won independence.
After four years of dispute, arbitrators upheld Suzuki’s request to terminate a 2009 agreement that never yielded a single joint project with the German company. As a result, Volkswagen will sell its 19.9% Suzuki stake, which is valued at about 463 billion yen ($3.8 billion).
“The past six years have been a very valuable experience," chairman Osamu Suzuki, who brokered the deal, told reporters in Tokyo on Sunday. “I came to realize there are companies different from us," and as a result, independence will be a “precondition" for future dealings.
Suzuki, a specialist in inexpensive cars, is smaller than global rivals such as Volkswagen, which sells about four times as many vehicles as its former Japanese partner. That puts pressure on Suzuki to safeguard its dominance in India and control rising development costs for green-car technologies, while pursuing a goal to boost annual revenue to 3.7 trillion yen by March 2020.
“Any potential partner would be quite worried about what sort of partnership it would have with Suzuki after what happened with VW," said Ashvin Chotai, managing director of researcher Intelligence Automotive Asia. “The culture of Suzuki is not very conducive towards working in a joint venture."
The goal of the pact with Volkswagen was to cooperate on small, fuel-efficient cars for emerging economies, providing Suzuki with access to technology while giving Volkswagen a wider role in the Indian market through Suzuki’s business there. Relations soured in 2011 after the Japanese company agreed to buy diesel engines from Fiat. As trust broke down, the companies accused each other of breaching the accord.
Fiat Chrysler Automobiles NV chief executive officer Sergio Marchionne, who is prodding the auto industry to consolidate, has expressed interest in talking with Suzuki in the past. Fiat wasn’t available to comment outside regular office hours on Sunday.
“Suzuki will certainly enter into partnerships, but to do that they don’t have to get married," said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen. “Scale isn’t the secret to happiness."
The Hamamatsu-based manufacturer may instead focus on targeted development projects in areas such as fuel cells and autonomous driving, said Takaki Nakanishi, an auto analyst at Jefferies Group Llc.
Even in winding down the relationship, the two companies were at odds. Suzuki said that Volkswagen has to sell the stake back to it or a party of the Japanese company’s choosing, while Volkswagen said the buyer of the stake hasn’t been decided yet. The German company, which has hired a bank for the sale, said it’s still analysing the ruling and will determine later who the buyer will be.
Suzuki also faces the prospect of having to pay damages after arbitrators ruled the Japanese company breached the agreement. The amount of any penalties would be addressed in a further stage of the arbitration proceedings, Suzuki said.
The company has “turned misfortunes into opportunities" before and will take time to review its strategic options, said Osamu Suzuki. The one thing that’s clear is that the company won’t be working with Volkswagen again.
“You don’t remarry someone who you’ve divorced," Osamu Suzuki said.