By on September 12, 2011

„It is like being married and getting a divorce. Instead of criticizing each other, it is better to go through it with a smile,” Suzuki’s patriarch chairman Osamu Suzuki told reporters at a hurriedly arranged press conference in Tokyo today. And a divorce it is: Suzuki announced it will terminate its relationship with Volkswagen after a nearly 2 year unhappy and childless marriage.

In a news release, Suzuki announced that “its board of directors has officially determined today dissolution of the comprehensive partnership and the cross-shareholding relationship with Volkswagen AG. “ Here is a short version of the long list of reasons given in the divorce papers (known as the “green form” in Japanese matrimonial matters):

“ Suzuki’s primary aim for the partnership was to receive technology transfer (including receiving technical information, etc.) from Volkswagen AG so that Suzuki could accelerate its development of environmental technology and other engineering areas to cope with intensifying competition of technology development in the worldwide automotive industry.”

“However, Suzuki had to realize that with Volkswagen AG’s minor equity participation of 19.89% in Suzuki, it is difficult to receive technology transfer at the same or higher level as Volkswagen Group companies where Volkswagen AG has nearly 100% of voting rights. From the beginning of this year, Suzuki has been accelerating its development of own environmental technology and other engineering areas.”

“Suzuki thinks that it is crucial to secure “independence” in its operating policy decision for maintaining its competitiveness in the domestic Kei-car market and Asian markets including India. However, Volkswagen AG publicly reported that Suzuki was a ‘company over which Volkswagen AG has significant influence on financial and operating policy decisions’.”

“Taking account of these facts, Suzuki has concluded that it is difficult to attain its primary aim for the partnership and also there is concern that the partnership would cause negative impact on Suzuki’s autonomous decision-making in its operating policy. Therefore, Suzuki’s board of directors has officially determined dissolution of the comprehensive partnership and the cross-shareholding relationship with Volkswagen AG.”

Suzuki will request Volkswagen AG to dispose of Suzuki shares held by Volkswagen AG according to Suzuki’s intention.” If Volkswagen does that, “Suzuki also will dispose of its Volkswagen shares in line with Volkswagen AG’s intention.”

Osamu Suzuki said that his company will buy back the 19.9 percent share held by Volkswagen, and he would happily sell Volkswagen the 1.5 percent Suzuki holds. Suzuki will get a deal if the trade is valued at stock exchange pricing: In December 2009, a Suzuki share went for 2,235 yen. Today, it had dropped to 1,484 yen. The Volkswagen share appreciated only marginally from €81.48 in 2009  to €93.46 today.

The timing of the announcements points towards a behind-the-scenes arrangement and a public kabuki-dance:  Volkswagen had accused Suzuki of contract “infringement” shortly before the Tokyo midnight on a Sunday. On Monday by noontime, the Suzuki board had already convened, and  calls went out for a press conference at 5pm. Usually, things don’t happen that fast, lawyers and financial advisors get involved and take their old time.

It’s just like in a real divorce: When the wife takes the stand and says “We haven’t had sex for more than a year and I feel abandoned,” a deal has been struck after months of behind-the-scenes warfare.

Once the divorce is in effect, will the Japanese bride say “hai, chikai masu” (yes, I will) to another beau soon? After two failed marriages (one with GM, one with Volkswagen), Suzuki seems to get ready to enjoy its freedom for a while. Says the press release:

“Suzuki has been proceeding with successful business cooperation with domestic and foreign automotive companies without equity relationship. Suzuki believes that if relationship with Volkswagen AG becomes that of “true business partnership” after dissolution of the cross-shareholding relationship, both companies would have good environment where successful cooperation can be built up in fields that both companies gain benefit from.”

I don’t give that “true business partnership” much chances and read the announcement as a “thanks, but after two years of nothing, I intend to sleep around a bit.”

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21 Comments on “Green Form! Osamu Suzuki Files For Divorce...”


  • avatar
    mike978

    “Suzuki will get a deal if the trade is valued at stock exchange pricing: In December 2009, a Suzuki share went for 2,235 yen. Today, it had dropped to 1,484 yen. The Volkswagen share appreciated only marginally from €81.48 in 2009 to €93.46 today.”

    Why would they get a trade? Suzuki shares have fallen by a third in 2 years whilst VW shares have increased 14.7% in two years (>7% a year is a good rate of return, so hardly marginal). There is no incentive for VW to sell the shares.

    I think the reasons given by Suzuki for terminating are odd :

    a) a complaint that VW gives preference to Seat, Skoda and other 100% owned VW companies than it does for a 19.9% owned company. It is hardly surprising and they should have known that before signing the contract.
    b) a hissy fit because VW states that they have significant influence over Suzuki. Maybe they should have removed the word significant but if you own 19.9% of a company (and are the biggest shareholder) then you expect some influence.

    The two reasons given just makes Suzuki seem clueless about international business and naive.

    • 0 avatar

      Neither of them is clueless. And both of them are well versed in international business.

      The true reasons for a divorce usually is not in the divorce papers – nor in the press release.

      Volkswagen probably was its overbearing self and behaved as if it owns Suzuki. I also heard stories of VW delegations wrinkling their noses at Suzuki installations.

      Suzuki probably believed that “equals” business in the beginning and got annoyed when it was not true.

      • 0 avatar
        mike978

        Thanks, although I note the financial part of my argument was not commented upon.

        I take your last paragraph to mean that Suzuki were at least a little niave.

        Why did Suzuki enter into an equity agreement in 2009 if as they say “Suzuki has been proceeding with successful business cooperation with domestic and foreign automotive companies without equity relationship.”? What was the rationale in 2009 and does it still exist today (albeit with someone else)

      • 0 avatar
        th009

        Bertel, maybe not clueless — but if you start dancing (let alone get married) I think it’s always good to understand your partner in advanced. With a 10:1 market cap ratio and a 5:1 production ratio, Suzuki-san should hardly have expected a partnership of equals. VW does have hybrid, EV and diesel technology that Suzuki doesn’t so if Suzuki-san says he didn’t find anything, it’s got to be personal preference.

        What I would be interested is in your insight into what happens next … I can’t see Piech giving up that easy, but I’m on the outside looking in.

  • avatar
    John Horner

    German car companies have a pretty mixed record visa-vis cross-border arranged marriages. Daimler-Chrysler, BMW-Rover and even Opel-GM all come to mind. Perhaps the business culture of the German auto companies is incompatible with those of other countries ????

    • 0 avatar
      mike978

      I see where you are coming from but Diamler-Chrysler was the poster child for a bad integration and the false “we are all equals”. BMW-Rover went badly because Rover was a weak brand predominately based in the UK. BMW has done very well with MINI. As for GM-Opel, they have been together over 70 years and Opel is doing OK business wise in Europe (the rumours of being divested don’t help though).

      • 0 avatar
        Jimal

        DiamlerChrysler was the poster child for the cutthroat nature of German business. Chrysler had money; Daimler Benz needed money. Daimler Benz offers “merger of equals”, which Chrysler sees being courted by such a large, stable company as a sign of its own strength. “Merger of equals” becomes rape and pillage and in the end Fiat buys what is left out of receivership with a little help from Uncle Sam.

        Mini worked for BMW because there was never anything legacy British about the new Mini apart from its name. Rover was a dog that not even Honda (remember the Sterling) could help.

      • 0 avatar
        SimonAlberta

        @Jimal

        Your closing comment about Rover is not accurate.

        Honda and Rover collaborated very successfully on smaller cars and even the Sterling (Rover 800 in UK) was not a total disaster by any means.

        A throwaway line such as yours cannot possibly encapsulate the true nature of the BMW and Honda experiences with Rover.

        It is quite believable that if BMW had really wanted Rover to prosper and grow it could have done many things differently and, who knows, Rover may still exist today.

        The smaller cars, Rover 200/400/600/75 were excellent cars in their day and many much-loved examples are still cherished by their owners to this day.

        Were they perfect? Of course not. But no worse than many other vehicles of their time.

        Rover was a victim of horrendous quality and production problems in the 1970s and early 1980s partly due to over zealous unionism and partly due to lack of investment and proper future planning.

        After that time, the engineering and base qualities of the vehicles themselves was not the fundamental problem at all.

      • 0 avatar
        mike978

        Simon – I think BMW did try with Rover, they certainly spent enough. The first true BMW/Rover product was the 75 which was a great car. However the losses from Rover were substantial and showed no signs of breakeven. Just like GM tried with Pontiac with the G8 and Solstice it is sometimes to late to save a brand. This is what I believe happened with Rover. So BMW sold it on (for GBP10 and forgave debts) and took MINI which has redeemed their original investment.

  • avatar
    hreardon

    I’m not very familiar with Suzuki’s business and its strengths/weaknesses, but if I had to guess, Volkswagen likely was the stereotypical, arrogant German partner.

    I’ve done business with several very large German conglomerates in the past three years and the level of arrogance is absolutely laughable. I would wager good money that this was 80% or better the cause for the divorce.

    • 0 avatar
      mike978

      I understand the stereotype and of course sometimes it is true. However VW and other large German industrial firms have reason for arrogance (or confidence depending on your perspective) since they have prospered over the past few years with record breaking exports. German is sole European (or North American country) to have a thriving industrial base and be strongly export driven. VW has increased sales and profits (as have BMW and others) and have a very strong cash reserve. They are, whether you like them or not, in a strong position.

      Of course things can change and they may become over confident or make large mistakes but Suzuki would love to be in their position (financially and product wise).

      • 0 avatar
        iNeon

        Dear Mike978– Confidence is quiet.

      • 0 avatar
        John Horner

        It is possible to be large and successful while still treating your customers and partners with respect.

      • 0 avatar

        Actually, some years the US exports more than Germany.

      • 0 avatar
        mike978

        Ronnie – I didn`t say Germany was the biggest absolute exporter (although it is by % GDP) I would hope the US exports more in absolute terms than Germany especially since the US has 3-4x the population and GDP.

        John – I agree you can be successful and treat people with respect. Has VW not treated Suzuki with respect? It seems Suzuki is the one who broke the agreement, hence the notification of infringement. Also it seems Suzuki told the media first, before VW, that the agreement was over. That, if true, is not professional. Suzuki should be held to high standards too.

  • avatar
    OldandSlow

    Whether or not there was a desire to attain EV or hybrid technology, Suzuki should have been well aware of what could happen if they linked up with an elephant. While they may have gained sales providing captive imports to GM in the 1990ies, getting Daewoo’d in North America really hurt them here.

    VW is all about platform sharing and with the exception of a certain North American minivan, Wolfsburg’s preference is that their brands share their technology.

  • avatar
    John R

    Perhaps Suzuki should perform the Fusion Dance with Mitsubishi instead.

    They’ve got the full breadth of the Mitsubishi Zaibatsu’s green technologies behind them. On the other side of things a Kizashi with a Lan-Evo motor could move more Kizashis while at the same time spread the cost of manufacturing the Evo…and then maybe the Evolution can go back to being an Evolution.

  • avatar
    i_godzuki

    On the day this deal was announced I spoke to a Japanese auto analyst. He told me Suzuki would do the same to VW as they had done with GM. Mess them around a bit, while they own a big enough share to keep other predators at bay. I guess that kinda happened, but the fall out came sooner than planned.

    The other thing I noted that day was the vast gulf in the thinking of the European and Japanese auto analysts when I read media reports. I guess they were both getting briefings from respective companies and it seemed to highlight the fact that the two parties were coming into this from very different positions.

  • avatar
    mike978

    Link below is for autoextremist’s take on the Suzuki/VW issue :

    http://www.autoextremist.com/on-the-table1/

    Suzuki doesn`t come out of it well.


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