Japan's Suzuki calls for Volkswagen 'divorce'

12th September 2011, Comments 0 comments

Japanese automaker Suzuki on Monday said it wanted to end its ill-fated two-year alliance with Germany's Volkswagen following disagreements between the two on how to operate together.

In a statement through the Tokyo Stock Exchange, Suzuki said it had asked Volkswagen to end the capital and business alliance between the firms and unload its stake in the carmaker.

"It's like a divorce," Suzuki Chairman and CEO Osamu Suzuki told a news conference on Monday. "Rather than trying to find faults in each other, it's better to smile at each other and say we were not destined (to get married)."

Relations between the two had become increasingly frayed and Suzuki's decision came a day after Volkswagen served notice of an alleged infringement relating to the supply of diesel engines to Suzuki from Italian carmaker Fiat. Suzuki said it decided "to cancel the business partnership and capital ties with Volkswagen AG due to worries that it is difficult to achieve our company's objectives concerning the business partnership.

"We will ask Volkswagen AG to dispose of (Suzuki) shares in correspondence with our company's intentions," it said, adding that it would dispose of its shares in the German automaker.

However, Volkswagen may not be prepared to quit its tie up with Suzuki, after a company spokesman told AFP it had no plans to unload its shares in the Japanese automaker.

"We stand by what we've always said, and what we said again yesterday," the spokesman told AFP, pointing to a company statement in which it insisted that Suzuki "remains an attractive investment."

Volkswagen's purchase of a 19.9-percent stake in Suzuki in December 2009 had been seen as an opportunity for both carmakers to benefit from their respective strengths in hybrid and small-car technologies.

The Japanese automaker holds about 1.5 percent of the German company, or 4.39 million shares, a Suzuki spokesman said.

Suzuki planned to seek support from Volkswagen in hybrid technologies and other eco-friendly areas, while the German firm hoped to jointly develop small cars for emerging markets by taking advantage of Suzuki's technologies.

The two carmakers were also considering ways to jointly procure parts and materials.

But they made little progress and have since halted their joint projects as the 1.7 billion euro ($2.3 billion) alliance turned sour.

Suzuki complained that its autonomy was being jeopardised and that it was being treated like a subsidiary by Volkswagen.

Analysts said the disintegration of relations between the two sides was not surprising given that the tie-up had been heading in that direction.

Chairman Suzuki on Monday cited "differences between our management philosophies" that would compromise the independence of the Japanese firm.

In response to the earlier notice of infringement from Volkswagen, the Japanese carmaker said it believes it did not violate the agreement with the German company.

"We were surprised that Volkswagen showed different views from ours that the engine (procurement) from Fiat is problematic and that the capital tie-up is attractive for stock investment," Suzuki said.

Suzuki shares closed down 2.75 percent at 1,484 yen in Tokyo trade.


© 2011 AFP

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