FRANKFURT: German car giant Volkswagen and Suzuki of Japan revealed an alliance on Wednesday to give VW a solid footprint in the Indian automarket for about 1.72 billion euros (2.53 billion dollars).
One analyst said the cash-and-share deal could also accelerate restructuring of the global automobile industry.
VW is to buy a 19.9-per cent stake in Suzuki by January 2010, and Suzuki would also acquire a stake in Europe’s biggest carmaker, a joint statement said.
According to Suzuki, the 19.9-per cent stake is worth about 222.5 billion yen (1.72 billion euros, 2.53 billion dollars), and the statement said Suzuki ‘intends to invest up to one half of the amount received from Volkswagen into shares of Volkswagen.’
The two groups said they had ‘reached a common understanding to establish a close long-term strategic partnership.’
Auto analyst Tatsuya Mizuno at Mizuno Credit Advisory said ‘the alliance may accelerate a reshuffle of grouping of the industry. The global auto industry is now facing a turning point.
‘For VW, Suzuki is attractive as Suzuki is strong in small car businesses in developing countries, in particular India,’ Mizuno added.
Volkswagen already has a strong presence in China so the alliance would create a vast network across Asia, a region expected to soon lead the world in economic growth.
‘In terms of product portfolio, global distribution and manufacturing capacities, Volkswagen and Suzuki ideally complement each other,’ the statement said.
The agreement is another step in VW’s plan to overtake Toyota as the world’s biggest automaker by 2018.
VW has just bought 49.9 per cent of the German luxury sports car maker Porsche and will acquire all of that company by 2011, making Porsche its 10th brand.
The head of VW’s supervisory board, Ferdinand Piech, has said he sees VW eventually owning 12 brands, and the group is also interested in the German heavy-vehicle maker MAN which could compliment its Swedish truck unit Scania.
VW already owns around 30 per cent of the shares in MAN and could aim to create a strong commercial vehicle division with the two companies.
Commenting on the alliance with Suzuki however, the statement said ‘both companies will establish a cooperative relationship while respecting each other’s independence as a stand-alone entity.’The companies plan a joint approach to the growing worldwide demand for more environmentally friendly vehicles,’ it added.
Mizuno said that ‘after ending its alliance with GM, Suzuki needed to find a strong partner in order to survive tough competition in the global market.’
The global auto industry was weathering the crisis and is now entering into a new stage’ where strong offers of small, environmentally friendly cars will be important, Mizuno said.
According to the joint statement: ‘The management of Volkswagen and Suzuki have concluded that the complementary strengths of each company make for a perfect fit in exploiting their respective advantages as well as rising to the challenge of the global market.’
Investors cheered the news, and VW shares showed a gain of 2.14 per cent to 80.58 euros in morning trading on the Frankfurt stock exchange, while the DAX index of German blue-chips was 0.40 per cent lower overall. —AFP
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