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Suzuki Motor seeks to dissolve pact with Volkswagen

Suzuki Motor seeks to end its 20-month old deal with Volkswagen after the German carmaker's 222.5 billion yen investment failed to yield a single project

Suzuki Motor seeks to end its 20-month old deal with Volkswagen after the German carmaker’s 222.5 billion yen ($2.9 billion) investment failed to yield a single project, Economic Times reported.

The Japanese automaker, which owns 1.49% of Volkswagen, plans to sell its holding if Volksagen agrees to end the tie-up, the automobile maker said.

The Wolfsburg, Germany-based carmaker owns 19.9% of Suzuki. Suzuki will seek to end the pact with Volkswagen, even if the German automaker wants to maintain it, Chairman Osamu Suzuki said.

Volkswagen on Monday said the company has no plans to dissolve its alliance with the Japanese carmaker. "The relationship is like a marriage and a divorce," said Chairman Osamu Suzuki.

"We should just have a simple break up with a smile and say we weren't meant for each other," he added.  The two carmakers stopped talking after Volkswagen described its partner as an associate in its annual report.

Suzuki decided to seek an end to its capital alliance with Volkswagen at an unscheduled board meeting on Monday, according to a statement. Suzuki wants to buy the stake Volkswagen owns and has enough cash to do so, Chairman Suzuki said.

"You can lead a horse to water but you can't make it drink," opined the chairman. "We need to mutually discuss and come to a conclusion." 

The Japanese carmaker said it did not break the cooperation agreement with Volkswagen and it does not expect to break-up with lead to fines, according to executive vice-president Yasuhito Harayama. Suzuki and Volkswagen’s partnership would not be the first German-Japanese automaker’s alliance to fail.

Daimler bought a 37% stake in Mitsubishi Motors in 2000 and 2001. The holding was unwound in 2005 after two years of sales declines at the Japanese carmaker.

The revenues fell after Mitsubishi Motors admitted to hiding defects, pushing it to a record 215.4 billion yen loss in the year ended March 2004. In contrast, France's Renault and Japan's Nissan Motor formed an alliance in 1999 that has lasted more than a decade.

Daimler joined the alliance in April 2010 by giving a 3.1% stake to both carmakers.

Suzuki Motor Corporation is a Japanese multinational corporation headquartered in Japan specializing in manufacturing compact automobiles, full range of motorcycles, all-terrain vehicles, and other small internal combustion engines.

Volkswagen Group is a German automobile manufacturing company. As of 2010 it was ranked as the world’s third largest motor vehicle manufacturer and Europe’s largest.

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