Volkswagen Accuses Suzuki of Violating Terms of Partnership

Volkswagen AG says Suzuki Motor Corporation violated the terms of its partnership arrangement by agreeing to purchase engines from rival Italian automaker, Fiat S.p.A.

In a statement released today, Volkswagen said, “Suzuki has now been given a period of several weeks to remedy the infringement.” He added, “Volkswagen considers this step regrettable, but necessary, and has offered to discuss the matter with Suzuki.”

There has been tension between the two automakers since early last spring when Volkswagen described Suzuki as an “associate” in its annual report. In June, Suzuki made the decision to purchase diesel engines from Fiat.

A spokeswoman for the German automaker told Reuters that Volkswagen is interested in maintaining its relationship with Suzuki and that, “We will have to see now how Suzuki reacts and then we will discuss the next steps to be taken.”

In a September 6 interview with Bloomberg, Suzuki Motor Corporation chairman, Osamu Suzuki said there was no communication going on between the two automakers.

Volkswagen, the world’s third-largest carmaker, has invested $2.9 billion in Suzuki, which has a leading position in India – a key market in VW’s effort to overtake Toyota as the largest, global automaker by 2018. During Suzuki’s last fiscal year, the company sold 2.46 million vehicles worldwide. Of those, 1.13 units were sold in India.

The partnership was signed in December 2009 and gave Volkswagen a 20 percent stake in Suzuki. The two companies said that the alliance was designed to allow for technology sharing, especially in the area of hybrid and electric vehicles, as well as to present opportunities for both automakers to expand into each other’s markets. Since signing the agreement, however, no new projects have been undertaken.

In a column published in a Nikkei, Japan newspaper last July, Osamu Suzuki stated that, following an extensive review of Volkswagen’s technologies, he had not found any that he was interested in adopting. That same month, he said that Suzuki was also open to forging partnerships with other automakers besides Volkswagen.

Volkswagen CEO Martin Winterkorn recently stated that, “The crux of the matter is the cooperation between two very different cultures. At the moment, we have taken a timeout. Nonetheless, we will hold onto our shares.”

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