Suzuki, Volkswagen ink capital deal to create top global auto group

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TOKYO, Dec. 9 Kyodo -
Suzuki Motor Corp. and Germany's Volkswagen AG inked a capital tie-up agreement
Wednesday, which would trigger the emergence of one of the world's largest auto
groups with boosted competitive edge in emerging markets and green technology.

Under the deal, Volkswagen plans to acquire a 19.9 percent stake in the
Japanese automaker for around 222.48 billion yen in January, making it the top
shareholder. Suzuki, in turn, will invest around 100 billion yen, with an
initial investment of 50 billion yen, to buy shares of the German automaker,
the two companies said.
The tie-up between the two carmakers will create an auto behemoth with sales on
a par with Toyota Motor Corp. in a move analysts say will spark further
realignment in a struggling global auto industry scrambling to survive with
cost cuts and new technologies.
''The automobile industry is going through a fundamental transition at the
moment,'' Volkswagen Chairman Martin Winterkorn said at a joint press
conference in Tokyo. ''Together, we can maximize our opportunities for
growth.''
The Suzuki-Volkswagen deal follows reports that French carmaker PSA Peugeot
Citroen is also looking to forge capital ties with Mitsubishi Motors Corp. to
cooperate in development of eco-cars and expanding their footprint in emerging
markets.
An auto analyst at a Japanese brokerage firm said, ''More alliances to
strengthen each other's brands through eco and small (cars) are expected in the
future between big automakers and small and midsize automakers as well as
between auto giants.''
Volkswagen, which already has a strong presence in the Chinese market, expects
to boost its business in other emerging markets such as India, where Suzuki
controls roughly half of the local auto market through its strength in compact
cars.
Suzuki, which ended its capital ties with General Motors Co. of the United
States, had been looking for a new partner that can provide ample funds and
know-how for developing eco-friendly vehicles, an area in which the Japanese
automaker is lagging far behind rivals.
Under the tie-up with Volkswagen, Suzuki is expected to jointly develop
gasoline-electric hybrids and electric cars, improve fuel efficiency of
conventional gasoline engines while also saving costs by sharing auto parts.
''The important thing is to improve quality, bring down costs, standardize auto
parts, and then to have a large sales number,'' Suzuki Chairman Osamu Suzuki
told reporters.
But Suzuki emphasized that the automaker will try to ensure its survival in the
industry under an ''equal'' partnership with Volkswagen, denying the
possibility that Volkswagen's stake will be increased in the short term.
''We will seek cooperation where necessary, but we are intent on going forward
independently,'' Suzuki said, adding its investment in Volkswagen is also to
ensure the company's autonomy.
In 2008, Volkswagen posted global sales of around 6.25 million vehicles,
ranking third in the world after Toyota and General Motors Corp., now called
General Motors Co. after its bankruptcy earlier this year. Suzuki sold about
2.36 million vehicles in the same year.
''We want to be the world's No.1 automaker by 2018 and Suzuki's cooperation
will accelerate the achievement of our goal,'' Volkswagen's Winterkorn said.
The analyst said the partnership between Volkswagen and Suzuki will likely pose
a serious threat to Toyota since the world's biggest automaker has lagged
behind in making compact cars that sell strongly in emerging markets. He
declined to be identified.
With the auto industry seriously hurt by the global recession, transnational
deal-making is in progress among carmakers aiming to jointly develop
cutting-edge technology, a highly costly undertaking.
Last week Suzuki Motor said it is pulling out from a joint car manufacturing
venture in Canada with GM, marking an end to GM's production ties with Japanese
automakers.
In the early 1990s, Suzuki and Volkwagen agreed on the joint production of
minicars for European consumers, but the two automakers later dissolved the
deal amid tough business conditions.
==Kyodo
2009-12-09 22:21:22