Volkswagen and Suzuki are exploring options over partnership

Article by Anita Panait, on July 29, 2013

Volkswagen AG and Suzuki Motor Corp. are studying whether to revive their cooperation efforts or agree on a settlement to terminate a two-year legal battle over a botched partnership, people privy with the matter told Bloomberg. The sources added that the effort involves senior executives from both parties, including Suzuki President Osamu Suzuki.

One of the sources remarked that VW and Suzuki still see the industrial logic for the cooperation as compelling. The effort, however, may still collapsed and failure of the talks might lead to the continuation of legal proceedings at a London-based arbitration court over the future of the partnership.

Frank Biller, a Stuttgart-based analyst at LBBW, remarked to Bloomberg VW and Suzuki stand to benefit if they could overcome the disagreements over leadership claims at the partnership, adding that both carmakers would still “complement each other very well.”

As part of the partnership agreement brokered by Suzuki and VW Chairman Ferdinand Piech, VW bought a 19.9-percent stake at Suzuki for EUR1.7 billion in 2009. Suzuki, on the other hand, purchased VW stock worth about EUR770 million.

The partnership -- which entails cooperating on small, fuel-efficient cars for emerging markets -- eventually collapsed in 2011 as both carmakers accused each other of breaching the agreement.

VW’s alliance with Suzuki was aimed at increasing its presence in India, in view to its goal of becoming the largest carmaker in the world. VW also sought to benefit from the Suzuki’s expertise in compact vehicles. Suzuki, on the other hand, sought to gain cost synergies through the alliance. [source: CarAdvice]

Topics: vw, suzuki, partnership

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