In the long simmering conflict between Suzuki and Volkswagen, the gloves are coming off and we are having a bit of domestic violence. Volkswagen just said in an emailed statement:
“The review of the partnership with Suzuki Motor Corp announced by Volkswagen Aktiengesellschaft has brought its first results. Volkswagen stated in Wolfsburg on Sunday that the company is serving notice of an infringement by Suzuki of the cooperation agreement concluded in December 2009.
The notice concerning the infringement relates to the supply of diesel engines produced by another manufacturer to Suzuki. Volkswagen takes the view that this contradicts the terms of the cooperation agreement. Suzuki has now been given a period of several weeks to remedy the infringement. Volkswagen considers this step regrettable, but necessary, and has offered to discuss the matter with Suzuki. At the same time, the company stresses it still regards Suzuki as an attractive investment.”
At this point (11:48 in the evening in Tokyo and a Sunday in Wolfsburg) it is unclear what the “notice of infringement” will trigger. It depends on how the contract is written. Typically, these contracts stipulate that the party that has been notified is given a chance to rectify the infringement. In this case, it would mean that Volkswagen expects from Suzuki that it at the very least cancels the diesel engine deal with Fiat. An even more welcome step would be that Suzuki places an order with Volkswagen. Both seem to be unlikely.
If Suzuki doesn’t rectify the alleged infringement, then Volkswagen can hold Suzuki in breach of the contract. What happens thereafter again depends on the language of the contract. Typically, an act like this signals the impending end of the alliance. These notices usually serve to establish “cause” that allows an unilateral termination of the contract.
I’d read the claim that Volkswagen “still regards Suzuki as an attractive investment” not as a peace offer, more like a statement that bolsters future damage claims. Volkswagen ominously says that this may not be all:
“This review has not yet been finalized.”