Volkswagen Buys 20 Percent Share in Suzuki

Months of rumors and a more credible report yesterday have culminated in the official news that Volkswagen will take a 20 percent share in Japanese automaker Suzuki, worth $2.5 billion. Volkswagen has its sights set on becoming the world’s largest automaker and with Suzuli’s small-car expertise, it hopes to make a large expansion into developing markets, like India.

The news comes just a day after VW officially took a 49.9 percent stake in Porsche. Unlike Porsche, Suzuki will remain independent as VW would need closer to 30 percent to take a controlling share. Currently Volkswagen also owns such important automakers as Audi, Bentley and Lamborghini. If VW were to take a controlling share, it would make the German automaker the world’s largest with combined sales of 4.145 million units, compared to Toyota’s 3.564 units.

Suzuki CEO and patriarch Osamu Suzuki was clear that his company will retain its individuality and identity. “I don’t want you to misunderstand: Suzuki is not becoming a 12th brand for Volkswagen,” he said. “I don’t want other folks telling me how to do things.”

Suzuki has been looking for a strategic partner as ties between it and General Motors collapsed this year. In return, Suzuki will also buy a 2.5 percent share in VW. Suzuki will also get hybrid and electric car technology from Germany’s largest automaker.

In a statement about the partnership, VW said that, “In terms of product portfolio, global distribution and manufacturing capacities, Volkswagen and Suzuki ideally complement each other. The companies plan a joint approach to the growing worldwide demand for more environmentally friendly vehicles. The management of Volkswagen and Suzuki have concluded that the complementary strengths of each company make for a perfect fit in exploiting their respective advantages as well as rising to the challenge of the global market.

In the automotive industry, where globalization and diversification proceed in parallel, both companies will establish a cooperative relationship while respecting each other’s independence as a stand-alone entity. Both parties are focused on achieving synergies in the areas of rapidly growing emerging markets as well as in the development and manufacturing of innovative and environmentally friendly compact cars.

As demand continues to rise for smaller cars and for powertrains with higher fuel efficiency and lower CO2 output, Volkswagen and Suzuki will offer a compelling solution for customers in emerging markets buying a car for the first time and also for customers in advanced economies seeking to lower their CO2 footprint while still enjoying the freedom of transport offered by an exciting range of cars.”

This partnership comes as the latest development in an automotive industry hit hard by the global economic downturn. Automaker are struggling to make ends meet and to set themselves up for future success. The trend seems to be such partnerships or mergers. With VW buying more and more automakers, earlier this year Chrysler was purchased by Fiat, which sees the U.S. market as a necessary step in becoming a global player. Earlier this week reports also suggest that Peugeot Citroen may form an alliance with Mitsubishi, mimicking a similar French/Japanese deal to the one formed a decade ago by Renault and Nissan.

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By Colum Wood