Suzuki, of Japan, has served Volkswagen with a notice of breach of contract, demanding that the German company give it access to important technologies within weeks. Unless it does so, Volkswagen, Suzuki’s biggest shareholder, must sell back its stake and quit the alliance, Suzuki said Friday.
“The whole point of the partnership was to gain access to key technologies, such as those for hybrids and environment technologies,” said the executive vice president of Suzuki, Yasuhito Harayama. “If VW can’t honor that, it must return Suzuki’s shares immediately.”
The latest accusation deepens a feud between the two carmakers. Last month, Volkswagen accused the Japanese company of breaching their agreement by procuring diesel engines from Fiat. It is demanding that Suzuki end that cooperation.
Volkswagen bought a 19.9 percent interest in Suzuki for €1.7 billion, or $2.3 billion at current exchange rates, in January 2009. At the Thursday closing price, that stake was worth $2.4 billion.
“There is not enough invested on either side to justify the effort to try to salvage the relationship,” said Kurt Sanger, an automotive analyst at Deutsche Securities. “Both can and will eventually walk away.”
Suzuki, which says it has yet to hear a proper response from Volkswagen about a proposal for a split, may consider other steps if Volkswagen ignores the notice, Mr. Harayama said.
Last month, Suzuki’s chairman and chief executive, Osamu Suzuki, offered to buy those shares with cash on hand. In return, he promised to give Suzuki’s 1.5 percent stake in Volkswagen, worth $1 billion, back to the German company.
Originally billed as a partnership of equals, the tie-up was meant to bolster Volkswagen’s presence in India for small cars and give Suzuki access to technology it could not afford to develop on its own.
But the partnership has so far failed to deliver any meaningful cooperation.
“If this situation is not resolved quickly, it does not mean that Suzuki is in trouble, but it is in neither company’s interest for this uncertainty to drag on for too long,” said Mr. Harayama, adding that Suzuki engineers were now developing new products without additional outside help.
In 1998, Suzuki joined a strategic partnership with General Motors, which took a 17.4 percent stake in the Japanese company. That arrangement unraveled in 2006 when the U.S. car company sold most of its stake as it scrambled for cash amid ballooning losses.
The Suzuki crisis comes as Volkswagen is juggling other deals, including a merger with Porsche. Volkswagen also plans to combine the German truck maker MAN, in which it bought a majority stake in July, with the Swedish truck maker Scania, a more recent acquisition.
“Suzuki is very good at making practical relationships when it needs something” like diesel engines in India from Fiat or a parts-sharing agreement with Nissan, said Mr. Sanger, the Deutsche Securities analyst. “It does not need to go out and remarry tomorrow.”
Article source: http://www.nytimes.com/2011/10/15/business/global/suzuki-moves-closer-to-ending-its-partnership-with-vw.html?partner=rss&emc=rss