By on September 18, 2011

Interesting twist in the Volkswagen-Suzuki sopu opera (see, Japanese is easy!): Suzuki could be doing Volkswagen a favor by filing for divorce. This way, Volkswagen can swallow Suzuki whole.

According to a report in the German magazine Der Spiegel,  there is a clause in the pre-nup between Volkswagen and Suzuki that precludes Volkswagen from getting more than the current 19.9 percent of Suzuki.  However, if Suzuki cancels the agreement, then Volkswagen is no longer bound to that clause either and can start buying Suzuki shares in the open market, or from willing sellers. With its 19.9 percent, Volkswagen already is the largest single shareholder of Suzuki.

According to Der Spiegel (and TTAC), Volkswagen always had the majority of Suzuki in mind. Volkswagen CEO Martin Winterkorn had suggested to Osamu Suzuki that future car development could  be done in four places: Wolfsburg develops the compact cars, Ingolstadt develops the upper class, Porsche in Weissach develops sports cars, Suzuki in Hamamatsu develops small cars. If Volkswagen gets the Suzuki majority, that is.

Osamu Suzuki’s answer: Iie kekkou des! (No thanks.) Let’s see whether this offer is still on the table after a less than amicable takeover.

The market is betting on a take-over by someone. After deterioration to 1,480 yet a few days ago, the Suzuki share traded for 1,610 on Friday and will most likely climb more on the back of these news.

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26 Comments on “Volkswagen-Suzuki: Sushi, Anyone?...”


  • avatar
    Tstag

    Ahh those cunning Germans. But presumably VW would be limited to 30%. After all isn’t that why Ford only bought 30% or so of Mazda?

    • 0 avatar
      th009

      Actually Ford owned 33.4% at the peak, enough to effectively control Mazda, to block super-majority (2/3) motions at a shareholder meetings — and to name to the top management at Mazda.

      I don’t believe Japan imposes any limits in this regard.

  • avatar
    Educator(of teachers)Dan

    I want to see Suzuki survive (or at least it’s interesting offerings like the Kizashi, SX4 (hatch), and most of their motorcycle line up) but not tethered to VW. The only end result I can see for a VW controlled Suzuki is the one that’s playing out for Saab right now.

    • 0 avatar
      th009

      Why would it end up like Saab? All of VW’s brands are currently doing much better than they were before VW bought them (yes, even SEAT is better than before).

      Whether the products would be something that you would like is another question, though.

      • 0 avatar
        Educator(of teachers)Dan

        Yeah it is isn’t it? VW has been the master of building many different cars on just a few platforms. What I was saying is that likely within a short amount of time Suzuki would loose much of what makes Suzuki unique. Example: Imagine a replacement Kizashi built on a VW platform, that to me is as bad as the badge engineered Saabs that have been built under GMs watch. (Remember the Kizashi is midsize and the article mentions leaving Suzuki just the small car development.)

      • 0 avatar
        th009

        OK, that makes more sense: you were comparing not to the deathwatch-Saab of today but the genericized Saab pre-GM bankruptcy. That’s a legit comparison.

        The VW brands do appear to get a fair bit of latitude as far as interior and exterior design goes, more than GM was giving Saab, but I’ll agree that differentiation would surely be reduced.

        In the takeover scenario, though, I do wonder whether VW would start moving toward a regional brand scheme for the smaller brands, with Suzuki focused on Asia, SEAT in Europe and Latin America etc. Four overlapping mainstream brands (VW, SEAT, Skoda and Suzuki) in any given market would be a challenge even for VW’s branding masters.

  • avatar
    OldandSlow

    If VW chooses to swallow Suzuki, I foresee a case of indigestion.

  • avatar
    Tstag

    I think buying Suzuki outright makes perfect sense for VW. VW don’t have much of a presence in many of the markets Suzuki operates in. And by acquiring Suzuki they would obtain a motorbike business.

    I do wonder if Seat and Suzuki will effectively end up selling the same cars though.

    • 0 avatar
      mike978

      I agree with your last sentence which also follows on from th009′s comment about a possible regional structure. It makes sense – Suzuki in Asia and the US and Skoda/SEAT in Europe and Russia. Suzuki sell very little in developed markets (Japan and India excluded). The Kizashi is a good car but Suzuki are not known for building great cars in general, hence why they wanted the partnership in the first place.

    • 0 avatar
      Pch101

      I think buying Suzuki outright makes perfect sense for VW

      It does. But the benefit isn’t mutual. Being swallowed up by VW and allowing it to get the benefit of its presence in emerging markets wouldn’t be particularly good for Suzuki.

      • 0 avatar
        Tstag

        Does Suzuki have a long term future outside of a long term partnership?

      • 0 avatar
        Pch101

        Does Suzuki have a long term future outside of a long term partnership?

        Sure, Suzuki would benefit from a relationship that includes a well-capitalized partner with which it can share platforms.

        But VW isn’t one of them. VW doesn’t want to be a partner. This isn’t a marriage, it’s a parent-child relationship, with VW starring as the dad.

      • 0 avatar
        mike978

        You make it sound like Suzuki has complete free will. They are publicly traded so if somebody wants to buy the shares (and somebody wants to sell) then there is not much Suzuki can do about it. That is one of the perils of listing on the stock market.

      • 0 avatar
        Pch101

        You make it sound like Suzuki has complete free will.

        I have no idea where you’re getting that from.

        I never commented on whether Suzuki was immune to a hostile takeover. I only stated that a VW “partnership” isn’t particularly good for the company. Whether or not that partnership is avoidable is a completely different issue from whether the company would gain from it.

      • 0 avatar
        th009

        @Pch101, “… whether the company would gain from it.”

        What is “company” in this context? If VW does a hostile takeover, Suzuki’s shareholders may be winners. If VW does as good a job with Suzuki as with their other acquired brands, Suzuki’s employees may also be winners.

        What does that leave? Customers in general will have considered themselves winners if the sales have gone up, otherwise they would not have bought Suzukis.

        Assuming that, the biggest losers may be the current Suzuki management. And maybe some enthusiasts who like the currently-made Suzukis.

        Not a bad deal for “Suzuki” overall, assuming of course that success as part of the Piech empire.

      • 0 avatar
        Pch101

        What is “company” in this context? If VW does a hostile takeover, Suzuki’s shareholders may be winners.

        Perhaps. I have my doubts that VAG would operate Suzuki in the same manner that it has some of its other brands because of the temptation to use Suzuki as a branding gateway to VW products in emerging markets. A strategy that constrains Suzuki to the betterment of VW is not particularly beneficial to the current organization.

      • 0 avatar
        mike978

        PCH – “A strategy that constrains Suzuki to the betterment of VW is not particularly beneficial to the current organization.” – Precisely, if there were a hostile takeover (who knows) then it would not be beneficial for the current management. Most times in hostile takeovers the “losing” sides management exits/is fired. As has been said it could be beneficial to Suzuki non-management employees. It would make sense from a VW perspective for Suzuki to be a gateway. However the key Suzuki benefit is India and I don`t know how well re-badged SEATS or Skoda’s would sell there from a price-point.

      • 0 avatar
        Pch101

        if there were a hostile takeover (who knows) then it would not be beneficial for the current management

        It doesn’t seem to matter whether the takeover is friendly or not — neither one is particularly good for Suzuki.

        VAG has a considerable operation in China. Meanwhile, Suzuki fares well just over the border in India.

        My bet is that VW wants more of that for itself. Why would Suzuki want to help VW to take Suzuki’s market share, in exchange for…well, not much? A deal of this sort is too lopsided to benefit the smaller of the operators.

    • 0 avatar
      Robert.Walter

      “And by acquiring Suzuki they would obtain a motorbike business.”

      I was going to comment on the bike business. I recall, maybe 5 years ago, Piech indicated h wanted to build eerything from bikes to Class-9 trucks…

      • 0 avatar
        th009

        Suzuki is losing money on its bike business. Are other motorbike companies profitable (ignoring the HD aberration here) or is this an industry-wide malaise?

        And, yes, Piech has the class-9 trucks and buses now, but bikes are still missing.

  • avatar
    minneapolis_lakers

    Hostile takeover is all but impossible to implement in Japan, and surely VW is smart enough to realize that fact.

    This to me sounds like VW saying to Suzuki “we are not selling these shares UNLESSS the price is right.”

  • avatar
    Tstag

    Triumph motorbikes are very profitable and fiercely independent having already rebuffed BMW (allegedly).

  • avatar
    minneapolis_lakers

    A hostile takeover of Suzuki is possible in theory; however, in reality, there’s zero chance for it to succeed in Japan.

    For one thing, Suzuki could easily block it with a poison pill.

    Consider this important legal precedent:

    A few years ago a small Japanese condiment maker –Bull Dog faced a hostile takeover tender offer from a New York-based investment fund –Steel Partners. Bull Dog had valuable real estate holdings, which was the main attraction for Steel Partners.

    Bull Dog activated a poison pill, and was subsequently sued by Steel Partners to block the pill. The case went all the way to the Japanese Supreme Court, which upheld the legality of Bull Dog’s poison pill.

    It is purely an intellectual exercise to think that VW could takeover a highly-profitable, cash rich Fortune Global 500 corporation with tens of billions of dollars in revenue, when it’s not even possible to takeover a small sauce maker with a few million dollars in revenue.

  • avatar
    Rental Man

    Why does VW needs Suzuki’s car business? For small products? VW has multiple cars starting with old platforms sold in 3rd countries and going into the Polo, Golf and the new UP!

    IMHO Suzuki USA is missing the mark. Not enough dealerships or product line. NO more 3rd seat SUV. No new SUV. The praised Swift never came over. Tiny Alto and Splash anyone???
    No one knows Kizashi. No one. They didn’t even find a rental company to pick up some for the sake of getting more people with money behind their wheel and product seen on the roads. Saab recently got some cars into Enterprise RAC. As did Fiat 500. Subaru and Hyundai / KIA have surprised lot’s of people who never considered their brands. The SX-4 4×4 has limited market and cannot keep this brand alive.

    • 0 avatar
      Pch101

      Why does VW needs Suzuki’s car business? For small products?

      For India. Suzuki dominates passenger car sales there. VW doesn’t even come close.

      http://www.rediff.com/business/slide-show/slide-show-1-auto-the-top-selling-cars-in-india/20110603.htm

      IMHO Suzuki USA is missing the mark

      Without a doubt. But in India, it’s a completely different story. India has a billion people, and a lot of them want and are going to want cars. An automaker with designs on gaining share in the India market would be wise to acquire Suzuki if at all possible.


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