Suzuki starts arbitration proceedings against Volkswagen

Article by Christian A., on November 25, 2011

Suzuki Motor Corp. is initiating arbitration proceedings against Volkswagen AG in an effort to force the German automaker to let go of its 19.89 percent share in Suzuki. Suzuki will launch the action on November 24 at the ICC International Court of Arbitration in London. It wants Volkswagen to sell its share back to Suzuki or to a third party that it chooses.

On November 18, Suzuki terminated its alliance with Volkswagen AG. Suzuki sought from Volkswagen the disposition of its shares, to which the German company showed "lack of response." In 2009, Volkswagen became the biggest shareholder of Suzuki.

It took the 19.89 percent stake in Suzuki, while Suzuki had 1.49 percent ownership of VW. The alliance was billed as a way for the German automaker to gain access to the India market, where Suzuki is strong. It was also meant for Suzuki to have advanced technologies from VW that it cannot afford to develop. However, the partnership started unraveling earlier this year, when VW described Suzuki as an "associate" it has sizable management control over.

This irked Suzuki's board. Since then, VW has insisted that Suzuki breached their agreement by sourcing diesel engines from rival Fiat. Suzuki retaliated by stating that VW broke it by not sharing advanced drivetrain technologies, which Suzuki had its eyes on. No joint project was made through the two-year alliance. [source: BBC]

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