By on December 9, 2009

The happy couple: Suzuki and Winterkonr. Picture courtesy

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.”

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19 Comments on “Done Deal: Suzuki And Volkswagen Hitched...”

  • avatar

    Suzuki is worth 12.5B?  I  don’t know if that seems low or high but it doesn’t seem right.

  • avatar

    I don’t think this bodes very well for Suzuki in the U.S. market since VW themselves can’t seem to figure it out.

  • avatar
    cRacK hEaD aLLeY

    Last time Japanese married Germans Mitsubishis bombed Pearl Harbor.
    All the prestige of a Suzuki enveloped within the reliability and dealer support only VW offers. Only for the insane or the ill-advised imo.
    I’ll take a Corolla  CE with 4 speed auto, plastic wheel covers, drum brakes and a baby-on-board sticker on the rear windows anytime over whatever abortion comes out of this marriage.

  • avatar
    Mr Carpenter

    Will it be a marriage made in hell, as Daimler-Chrysler was? 

    I distinctly recall visiting a pal in his garage as he was working on a car for a family member, and talking car industry news back when the “merger of equals” was announced.  My pal is a certified mechanic, body man and German car afficiando, and has lived in Germany, though is American.

    His assessment turned out 100% correct.  He opined that the merger of Chrysler and Daimler-Benz would result in the Germans taking over; Chrysler (lack-of) quality; and Mercedes ‘styling’ – i.e. the worst of all worlds.  I could only agree 100%. 

    What we didn’t foresee back then was the train wreck that would happen to Chrysler. 

    Suzuki deserves better, but I suppose when you are the last unmarried spinster standing all alone in the corner and a (somewhat) handsome prospective groom asks for your hand….  you might be wise to say yes…… and hope for the best. 

    Seriously, given the times, smaller independent auto makers cannot make it alone any more. 

    Look for Mitsubishi and PSA to do the same, as reported here at TTAC. 

    Wonder what’ll become of Mazda, now that Ford has divorced “her”? 

  • avatar
    Steve Biro

    I just hope this doesn’t mean VW will bless Suzuki with its “magic” when it comes to cars bound for the U.S.  Rebadged Daewoos not withstanding, Suzuki’s cars and trucks have always had a reputation for being tough as nails, even if they weren’t the most refined.  Maybe Suzuki can teach VW how to build sturdy, long-lasting cars for this market.  A Kizashi versus a Jetta or Passat?  No contest.  Upmarket interiors are nice but I’d be willing to trade down just a bit for longevity and reliability. 

  • avatar

    I don’t think this had anything to do with North America (I don’t know that either particularly cares about america given thier success elsewhere) and has everything to do with India and leveraging small car platforms, engines, etc.  There are clear benefits to both, VW gets to leverage it’s platforms/engines accross another brand in two large markets where it was weak before, india and Japan (suzuki is the number 2 automaker in Japan b/c of kei cars and could actually provide VW with a smart competitor without the investment that Merc. made) and suzuki gets access to things that it couldn’t afford to develop itself.


  • avatar

    And there is always the “biological solution” as the saying goes in Wolfsburg: Suzuki-San is 80.

    Does anyone else feel a chill when Germans refer to someone’s death as a “solution”?

  • avatar

    This will be interesting for Toyota, as Suzuki is a significant competitor in Japan.  If VW does proxy this into a larger share, it means Toyota might have something that remotely resembles domestic-market competition.  Bet that Toyota will not take that threat lying down.
    On the other hand, VW is well on it’s way to making the same kinds of mistakes that GM made with regards to branding an acquisition: it already self-competes in several markets and has to deal with the cost of upkeep on those divisions, and much of it’s growth has been fueled either by artificial divisional barriers and entries in markets that aren’t going to be quite the cash-cow they have been for the past few years.  Having the #1 spot is all well and good until your #2 and #3 competitors are making more money than you.

  • avatar

    I don’t think VW can be compared to GM. they keep their brands relatively separate. an Audi a4 is much different from a Passat. Nothing remotely what GM is doing in badge engineering. Of course there is cannibalism. When your brands own 40% (or whatever the combined Seat/Audi/Skoda/VW share is) of the market as in Germany there will be some cross-shopping.
    This at least has a chance of success since both companies are complement in technology and markets.

    • 0 avatar

      Agreed, even when the Passat and A4 were mechanically the same, the Audi and VW felt very different and looked different. Same thing with the A3 and Golf/Jetta.  Even the Skodas and Seats look and feel different than their Audi and VW brethren. If anything, It’s badge engineering done right. GM should take note.

  • avatar

    +1 rnc.. This deal is all about India, the 2nd fastest auto growth market in the world. All the big boys want in on that action and VW just catapulted themselves up there. And yes, this would eventually turn into VW taking over Suzuki.

    • 0 avatar

      This deal is all about India…
      I suspect this is mostly correct.  India is (as China before it) transitioning from Third World into a developing country.  Translation: it has growth potential.  According to the Hindu Group Business Line, Polo is set to launch next year in India, Skoda already has an upscale presence, and Suzuki, the big Indian player, will be able to transition from the GM-Fiat diesel to more advanced VW technology.  How a Teutonic-Indian-Japanese mix will play out is anyone’s guess.  People in the US who might worry that VW will somehow destroy the intrinsic quality of their beloved Swift (or whatever) need to understand the meaning of it all from a less parochial reference.

  • avatar

    He looks like someone who’s finally found a sucker and is all the happier for it.

  • avatar

    I think this is an interesting deal from a North American point of view (although I agree that this was probably about Asia). Suzuki does not have an established product line here, so switching the Kizashi to the mid sized sedan architecture and introducing VW parts to the sx4 can be done without being too obvious about it or hurting credibility. More NA volume for VW and far better drivetrain tech for Suzuki.

    I would expect Suzuki to stay downmarket of VW, allowing the germans to sell $15k cars without having to resort to decontenting. I, for one, would love a VW mechanical package paired with a cheaper, more reliable and simpler interior. I’d go so far as to declare “no-downside” from a NA consumer’s point of view, at least so long as Suzuki dosen’t just start selling last gen VW’s.

  • avatar
    Steve Biro

    I, for one, would not like any VW technology in any Suzuki built for the U.S. market.  VW’s look great on paper and are wonderful to drive when they’re brand new.  I want to like them.  I really do.  But a few thousand miles down the road and they become nightmares – largely due to design defects.  Now, I’m sure a dozen people will post about their ownership of trouble-free VWs.  But they are the exceptions that prove the rule. The numbers don’t lie.  One’s chances of having major problems with a VW are very high compared with other brands. 

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