Who would have thought that they are moving that fast: VW will buy a 20 percent stake in Japan’s Suzuki for $2.5 billion. It’s announced and it is official, including a photo-op with a beaming Winterkorn next to a grinning Osamu Suzuki. Rumors of that, well, tie-up had been around for a while and had recently intensified, but the speed is nonetheless surprising. Except for those who know Piech. At the September IAA auto show, Piech had said that 12 brands are better than 10. Everybody who knew Piech knew that he was referring to MAN/Scania trucks on one end of the spectrum, and Suzuki small cars and even motor bikes at the other.
Piech’s protégé and VW CEO Martin Winterkorn, was hopeful the Suzuki alliance would help catapult the Wolfsburg-based carmaker past industry leader Toyota Motor Corp ahead of plan.”If that succeeds faster (than 2018), we’re happy,” a grinning Winterkorn told reporters the Tokyo press conference, Reuters reports
Osamu Suzuki has a different view: “I don’t want you to misunderstand: Suzuki is not becoming a 12th brand for Volkswagen, I don’t want other folks telling me how to do things.” Time will tell. And there is always the “biological solution” as the saying goes in Wolfsburg: Suzuki-San is 80. Nobody in Germany really believes that Volkswagen is content with owning only a minority share. They want to be able to count Suzuki’s sales and n umbers as theirs. The Nikkei [sub] already muses that the “ambitious move may create a global alliance rivaling Toyota Motor Corp. with a dominating presence particularly in the emerging markets of China and India.”
Whatever it may become, at the moment it’s not a takeover, it’s an alliance: Suzuki will invest up to half of the proceeds in a cross-shareholding and pay $1.13b for a rather symbolic (and tax efficient) 2.5 percent stake in VW.
As we’ve said before, the Suzuki-deal works for both. Suzuki has what Volkswagen needs, and Suzuki needs what Volkswagen has.
Suzuki pretty much owns the Indian market at a slightly deteriorating market share. Suzuki.Maruti’s share of that market has fallen over the last year from 45 percent to about 40 percent (with passenger car share down from 55 percent to 48 percent). VW is just starting out in India, but can complement Suzuki at the slightly larger end,
Volkswagen has a dominant role in other growth markets such as China and Brazil. Suzuki has an output of 2.36 million units a year, added to VW’s sales, Toyota would be toast, and Winterkorn would be happy. He’s not the only one who likes the deal.
Suzuki’s shares were up 3.5 percent in Tokyo market, Volkswagen rose as much as 2.9 percent in Germany, the leading gainer among German blue chips.
But it’s not all roses. The WSJ is already pointing out the possibility of a great Teutonic-Nipponese family feud: “They are fiercely independent family-led companies, which may make any benefits more difficult to deliver.”