By on December 10, 2010

Uh-oh. Septuagenarian Ferdinand Piech is expressing youthful impatience with octogenarian Osamo Suzuki. Volkswagen’s Chairman of the board “is reportedly irked at the slow progress of his firm’s alliance with Suzuki,” says The Nikkei [sub]. The reason? “A year after Suzuki and Volkswagen agreed on a capital and business tie-up, the track record of their partnership remains devoid of significant accomplishment.”

Volkswagen is urging Suzuki to get on with the show, while Suzuki is dragging its heels. “We did not team up with VW for quick gains,” said a senior Suzuki executive. Piech on the other hand is showing “impatience with what he sees as the glacial pace of progress in their efforts to work out a specific plan for cooperation,” as the Nikkei puts it.

There has been intensive shuttle diplomacy between Wolfsburg and Hamamatsu, which produced exactly nothing. “The time frames in which the automakers are trying to extract benefits from the alliance apparently differ,” says the Nikkei with dry Japanese humor.

VW spent 1.7 billion euro ($2.25 billion) to buy a 19.9 percent stake in Suzuki, and Winterkorn needs to show that there is a ROI if he doesn’t want his head handed to him at the Hauptversammlung, or main shareholder’s meeting next April.

But herein lies the rub: Suzuki received cash when they needed it most, and Volkswagen expects a lot of interest:

  • Volkswagen wants to capitalize on Suzuki’s overwhelming market share in India. VW is nobody in India, while Suzuki owns half the market. One reason for this is Suzuki’s huge presence in India.
  • In China, Suzuki could benefit from Volkswagen’s market dominance. But VW wants Suzuki’s Kei car help to produce the small low-price cars that will be read hot in China’s rural areas.
  • Volkswagen wants to unseat Toyota as #1 carmaker. Together with Suzuki, they could. Alone, no chance. Toyota and GM are having a neck-on-neck race for the top spot (both will probably report more than 8 million cars produced by year’s end) while Volkswagen will probably be a million units behind. Suzuki will end the year well over 2 million.

Suzuki could also use help elsewhere in the world. But their Chairman won’t be asked why he collected $2.25 billion from a bunch of impatient Germans.

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5 Comments on “Slow Suzuki Tests Piech’s Patience...”

  • avatar

    I’m not sure exactly why, but this particular tie up fascinates me. I

  • avatar

    Ok, who else has that image of Hitler banging his fist on the desk but is yelling “SCHNELL SCHNELL SCHNELL SCHNELL SCHNELL!!!”

  • avatar
    Mr Carpenter

    I still think a better tie-up would be Mitsubishi and Suzuki. 

    Look how they complement one another.  Mitsubishi has some strength in China, Suzuki in India.  Mitsubishi has a North American factory and a Western European factory, Suzuki has an Eastern European factory.  Mitsubishi Motors has Mitsubishi Bank (huge) and Mitsubishi Heavy Industries (huge-r) behind them. 

    Mitsubishi has the book-ends (eco-cars and rally cars) while Suzuki takes the middle ground well (especially towards the smaller lower cost end, which is where much of the future growth is to be in up-and-coming nations). 

    Plus there is no language barrier, no national culture barrier (just a “corporate barrier” to overcome). 

    The best of it is, Suzuki-san could merge the rest of Suzuki with Mitsubishi Motors, leaving VW with a paltry sub-10% ownership, and simply collaborate where it would be necessary – never to be taken over completely – and could then retire in peace. 

    Put it this way – a combined Suzuki-Mitsubishi would elicit nothing more than shrugs and “meh” from most Americans.  But North America is but a future failed republic and minor player in the world stage.  Sadly. 

  • avatar
    Mr Carpenter

    OK I’ll try this again!  This time, I’ll copy my own post before submitting it so if it disappears into the “ether” again, I won’t waste so much time typing it all three times…

    I think it’d make much more sense for Suzuki and Mitsubishi to go in on a full scale merger, than for Suzuki to play footsie with Volkswagen. 

    Think of it like this:  Mitsubishi has the book-ends (eco electric and rally performance) with a smattering of SUV in the middle.  Suzuki has the middle ground (more towards the smaller end of the car sizing and pricing formula, with a sprinkling of SUV). 

    Suzuki is massive in the best-chance for excellent growth over the next 20 years – India.  Mitsubishi is relatively strong in China, has a car factory in the US, a car factory in Western Europe (Holland) and Suzuki has factories in Eastern Europe. 

    Mitsubishi Motors has the backing of Mitsubishi Bank (huge) and Mitsubishi Heavy Industries (huge-r), Suzuki has good backing as well, plus is a conglomerate re: outboard motors, motorcycles, etc. 

    They share a national language, and there could be massive savings by selling some of their Tokyo properties and putting much of the automotive operations away from Tokyo (I believe Suzuki’s facilities are outside Tokyo?) 

    Mitsubishi has been through a lot (and hopefully the old adage about tough times making for tough people holds true), and Suzuki-san needs to pass off operations to a new generation – the two companies together could use their best talents and bring forward new management for benefit of the merged company. 

    There would be massive savings on development and engineering costs, purchasing costs, and many world markets would be serviced by one, the other or both (and where they would be service by both, these operations could be merged). 

    I realize that if Suzuki and Mitsubishi Motors merged, most Americans would either say “meh” or be entirely uninterested, but the truth is – the US is a rapidly failing republic and quite frankly, our best years are behind us.  So in fact, to Suzuki-Mitsubishi, a presence here is no more important than one in some South American nation such as Brazil or Argentina. 

    If these companies merged, it may well leave VW with a paltry sub 10% ownership and this would then allow the companies to only utilize technologies on an as-needed trade-for-trade basis as minor partners. 

    Personally, I think that’d be better for Suzuki, but nobody really asked me…

  • avatar

    More likely Suzuki will merge with Mazda under VW control . Suzuki and Mazda line-up are complementary, also they shared many common Japanese shareholders . After Ford, Suzuki is Mazda most important partner . 4 Mazda models sold in Japan are based on Suzuki cars : Mazda AZ-Wagon ( ), Mazda AZ-Offroad ( ), Mazda Carol ( ) and Mazda Scrum Wagon ( ) .

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