VW Will Acquire As Much As 20% of Suzuki

Brendan Moore

12.08.2009

VW logoSources with direct knowledge of the deal have told Reuters that Volkswagen AG has concluded negotiations with Suzuki, Japan’s fourth-largest automaker, to take a stake in the Japanese company of as high as 20%.

The sources say that an announcement could be made as early as next week.

It is expected that VW will increase that stake in the future to at least one-third, in order to have a controlling stake in the company. Such a move would make Suzuki a VW subsidiary.

VW has stated publicly that it wishes to be the world’s largest auto manufacturer by 2018. Suzuki’s minicar and small car expertise and its sales strength in developing markets could be quite instrumental in achieving that goal.

Although Suzuki has been saying that they would welcome a partnership with a major company since they lost their previous ties to General Motors, Suzuki CEO Osamu Suzuki denied that any talks were occurring with VW as recently as three weeks ago. The news of a deal with VW, therefore, is somewhat surprising.

Volkswagen’s $45.7 billion USD market capitalization now encompasses ten brands, including VW, Porsche, Audi, Lamborghini, Skoda and others, a dominant position in Europe, China and Brazil, and high growth potential in other developing markets. VW’s weakest area may be the US market, where, despite major past efforts to increase their market position, VW has only a 2% market share.

Suzuki is the 800-pound gorilla of the expanding Indian market, as well as the unquestioned leader in the unique-to-Japan market segment for 660cc minicars (kei cars), and currently has a market capitalization of $13.7 billion. Suzuki has a minuscule .2 % of the US market. Admirably, Suzuki also owns 20 percent of itself in treasury stock, bought back from GM between 2006 and 2008 after GM signaled its exit from their partnership.

GM’s first investment in Suzuki was as far back as 1981 and eventually climbed to 20 percent of the Japanese carmaker in 2001. GM’s financial problems precipitated an unwinding of the partnership. In fact, on a related note, Suzuki divested itself of 50% of CAMI just a few days ago. CAMI was a Canadian joint venture it maintained with GM during its partnership. Suzuki sold their share back to GM.

VW is expected to very quickly either tap Suzuki’s expertise in order to develop a platform for their small Up concept car, or just adapt Suzuki’s existing platform in whole, and be done with the development in one stroke.

COPYRIGHT Autosavant – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

Share This Post On

9 Comments

  1. Very, very smart move by VW.

    There’s going to be a lot of action in that small car segment in most regions of the world.

  2. A Volkuki?

  3. Suzuki definitely needs help to get out of low priced Japanese sedan neighborhood, so I think this benefits them as much as it benefits VW, maybe even more.

  4. I wonder if VW will catch GM syndrome in coming years–too many brands. They have VW and Audi as core brands, but also Bentley, SEAT, Bugatti, Lamborghini, Skoda and Scania AB. Now Suzuki. And, at least in the US, their long-term quality is, shall we say, lacking.

  5. VW’s quality may be less than others, but their brand loyalty is very high. Most owners of VW consider their car attractive, fun to drive, etc.

    Hell, if they could just get the quality up to Honda levels, they would be Number 1 in the world easily.

  6. VW doesn’t just gain small car technology, they get geography as well because they get India with Suzuki.

  7. … but their brand loyalty is very high. Most owners of VW consider their car attractive, fun to drive…

    I wonder what might happens when the others will reach VW’s level in the “fun to drive” field as well? Here in North America, Ford had proved they could built as the same quality as Toyota and I think they might be able to prove they are fun to drive as VW.

  8. I for one as a VW bug owner hope they get their act together on quality. fun to drive people like to look and smile but sooooo many problems

  9. Big home run for both companies and a partnership that makes sense.

Submit a Comment

Your email address will not be published.