Suzuki: Piech Out, Marchionne In?

Bertel Schmitt
by Bertel Schmitt

Despite saber-rattling, legal threats and affirmations that Volkswagen does not intend to give up its share in Suzuki, Volkswagen started its climbdown. Ferdinand Piech himself signaled that Volkswagen can go it alone. At the Frankfurt Auto Show, Piech said that Volkswagen is “big enough.” His man Winterkorn quickly fell in step and told Reuters today: “”Suzuki was one option. But we can do it on our own.”

That should be signals enough for everybody at Volkswagen to put the Suzuki saga behind themselves and to concentrate on other pressing business, such as the messy Porsche merger.

Back in Tokyo, The Nikkei [sub] wrote what seems to be Suzuki’s version of the story. Ever since Osamu Suzuki used The Nikkei as the host of its own blog, the Tokyo business paper had the inside track in Hamamatsu.

Quite obviously written with heavy input from Sukuki, The Nikkei’s chronicle of the saga comes to the conclusion that both parties did not receive what they had expected.

Suzuki did not have the money to invest heavily into green technology and electric cars with doubtful payback. Suzuki expected this know-how from Volkswagen. To its dismay, Suzuki realized that Volkswagen has less green cred than assumed. The Nikkei writes that a

“factor behind the breakup was Suzuki’s realization that VW did not have much cutting-edge environmental technology to offer. Suzuki’s chief reason for forging an alliance with VW was to get its hands on environmental technology so that it could focus on its strength: low-cost manufacturing.”

“But VW is not so far ahead of its rivals in green technology. In Europe’s auto industry, many key technologies are the intellectual property of Robert Bosch GmbH, the world’s largest maker of autoparts. But even Bosch has been lagging in development of key electric vehicle technologies such as lithium-ion batteries.”

In other words, Suzuki realized that it doesn’t have to sell shares to get the technology. They can just write a purchase order to Bosch. Or better, talk to Nissan or Toyota in Japanese.

Volkswagen likewise did not get what it wanted. Namely all of Suzuki. Adding Suzuki’s 2.9 million cars to Volkswagen’s 7.3 million cars sold in 2010 would have propelled Volkswagen over the 10 million unit mark and way ahead of the competition. It would have solved Volkswagen’s problems in India and would have provided Wolfsburg with a solid footing in low cost cars – an art that has been forgotten at Volkswagen, some time in 1980.

Instead of small cars, Volkswagen perfected the art of building large empires. Throughout Volkswagen’s history, VW had taken over other companies in step-by-step fashion:

  • Volkswagen bought 50 percent of Audi in 1964, and the rest a year later.
  • Volkswagen started an alliance with SEAT in 1982, bought 51 percent in 1986, and the rest in 1990.
  • Skoda started as a joint venture in 1990. A year later, Volkswagen had 30 percent. In 1994, Volkswagen had 60 percent and in 2000, Skoda was wholly owned by Volkswagen
  • The same happened with Scania and MAN, which are now being merged by Volkswagen.

At Volkswagen, it is understood that taking 19.9 percent of another company is just the first step to eventually swallowing it whole. Anybody who has worked at Volkswagen for a while will act, work, and behave under this assumption.

This of course was known by Suzuki. Or it should have been known. Writes The Nikkei [sub]:

“When the two companies announced their tie-up at the end of 2009, Suzuki’s hard-bargaining chairman, Osamu Suzuki, repeatedly stressed it was an equal partnership.”

Suzuki was expecting the kind of loose partnership it had with GM while the General owned 17 percent.

The people at Volkswagen did not get the memo, had received different instructions, or were simply following Volkswagen S.O.P. The Nikkei continues:

“VW demanded “all kinds of information” from Suzuki, according to an executive at the Japanese carmaker. VW’s attitude provoked complaints among Suzuki employees, who felt their company was being treated as if it were a member of the VW group.”

Already unnerved by Volkswagen personnel that behaved as if VW owns Suzuki, the Japanese had their suspicions confirmed when they opened Volkswagen’s annual report:

“The last straw was VW’s annual report for 2010, which described Suzuki as an important company over which VW has “significant influence” regarding financial and operating policy decisions. VW says it was only following accounting rules, but the move prompted Suzuki to begin looking for ways to dissolve the partnership.”

Of course, a possibly soon unattached Suzuki stirs desires at other makers. When Fiat announced its new diesel engine deal with Suzuki last January, we wrote that this “could possibly raise eyebrows in Wolfsburg.” Sure enough, Volkswagen now claimed – a bit belatedly – that Suzuki and Fiat were caught in flagrante delicto. Which in turn prompted Suzuki to file for divorce.

Being fingered as the home wrecker, Fiat boss Sergio Marchionne is already trying to turn an affair into a long-term relationship. Marchionne told Reuters today that Suzuki would be an “interesting partner for the Asian market.” No kidding. Fiat is especially weak in Asia and needs a partner bad. But who says that Suzuki will jump in bed with Marchionne after having narrowly escaped being gang-raped by Piech and his boys?

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href=""> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href=""> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • PrincipalDan PrincipalDan on Sep 14, 2011

    Hey is that a recent pic of Sergio? It looks like he got a haircut and actually PAID for it. Although this Fiat-Suzuki tie-up has me picturing a Suzuki Kizashi with a Dodge grille. The funny thing is it might sell better than some of Dodge's efforts in the midsize arena. FWIW I miss the sort of pics that Bertel would have used with these articles not all that long ago. A story like this would have been accompanied by a pic of an Asian female in bondage.

    • See 1 previous
    • Psarhjinian Psarhjinian on Sep 15, 2011

      @Bertel Schmitt The point is you had an opportunity for shibari on the front page and squandered it.

  • Eldard Eldard on Sep 18, 2011

    Why did they move out of Japan's coast if they'll just go with Fiat? They'll need all that water once they start using Italian Roast Engines.

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