By on December 8, 2009

Does Up Lite the way?

Rumors of a VW-Suzuki tie-up were first floated on these pages by Bertel Schmitt, who reported that VW might be after a ten percent stake in the Japanese firm last summer. And with news last week that GM was buying out Suzuki’s stake in CAMI, the momentum seemed to be building. Well, Reuters reports that Volkswagen could announce that it’s taking a 20 percent stake in Suzuki, a deal valued at $2.8b, as soon as this week. Another source tells Reuters that the VW stake could become a 33 percent plus controlling interest in the future.

Though the deal makes sense for both parties, Suzuki had denied rumors of a Volkswagen alliance shortly after the rumors first started springing up. Volkswagen is strongest in emerging markets like China and Brazil (not to mention its home market of Germany), but the German giant has little presence in India, a market currently being pursued by all the global players. Suzuki’s India-market JV, Maruti, is by far the subcontinent’s strongest automaker, and a tie-up would help VW break into the Indian market. Moreover, VW is seeking assistence with its new Up! minicars, and Suzuki’s core small-car competence could help that platform become a contender in the global entry-level car sweepstakes. Suzuki, for its part, needs access to expensive EV and hybrid technologies that it can’t marshal the resources to develop. The fourth largest Japanese automaker also faces long-term challenges in the form of succession concerns: the 80 year-old Osamu Suzuki had been grooming his son-in-law for the top spot, only to have him pass away two years ago. According to Reuters, the firm has since struggled to find a successor. Could Suzuki end up as just another badge in Volkswagen’s brand collection?

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