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Suzuki wants to end its two-year alliance with VW over Fiat controversy

By Giulia Cambieri

An alliance between family-controlled carmakers Suzuki and Volkswagen may come to an end over a dispute involving Fiat, the Italian car manufacturer controlled by the Agnelli family.

Suzuki Motor offered to buy Volkswagen’s stake in the company on 12 September after the German firm accused its Japanese partner of breaking the terms of their contract by agreeing to buy diesel engines from Fiat, instead of first considering VW.

However, in a statement, Suzuki denied the allegation: “We can affirm that we have not breached the contract.”

Suzuki and Fiat partnered in 2005 to make diesel engines in Asia. But, in June, Suzuki chose Fiat’s, and not VW’s, diesel engines for cars built in Hungary.

As well as claiming this breached the Suzuki-Volkswagen partnership agreement, VW said it had given its Japanese partner several weeks to correct the alleged infringement, which it did not do.

Suzuki chairman and chief executive Osamu Suzuki on 12 September offered to buy VW's stake in his company and to offload its 1.5% stake in VW back to the German group but Volkswagen said it doesn’t intend selling its shares.

The partnership between Suzuki and VW started in December 2009, when VW purchased a 19.9% stake in Suzuki for €1.7 billion.

The alliance should have helped VW gain access to the small cars market in India through Suzuki's leading position in the country, while giving Suzuki access to hybrid and diesel technology it could not afford to develop on its own.

VW is the third-largest carmaker in annual car sales, after Toyota and General Motors.

At the time, the two companies said they intended to work together to expand their presence in emerging markets as well.

However, the partnership has been troubled since the start, partly because of the two companies' different corporate cultures, and, almost two years after the deal, no joint projects have begun.

In July, the relationship between the two companies suffered further after VW described Suzuki in its annual report as an associate in which the Wolfsburg-based carmaker can "significantly influence financial and operating policy decisions”.

Osamu Suzuki, who began working at Suzuki in 1958 after marrying Shoko Suzuki, granddaughter of the company founder Michio Suzuki, responded by writing on his blog that “the two companies differ vastly in size, so maybe as time goes by, Volkswagen has gotten the mistaken notion that Suzuki is under the VW umbrella”.

Volkswagen is headed by Ferdinand Piech, grandson of founder Ferdinand Porsche.