When Auto Companies Fight: Suzuki and VW

September 14th, 2011

Why aren't they looking at each other?

Chairman Osamu Suzuki appears to be hopping mad. Volkswagen’s chairman Martin Winterkorn is playing it cool. The companies are splitting apart after less than two years of an unworkable relationship.

In a way, the whole thing seems to have unraveled because of a clash of cultures—not just business cultures but national cultures.

In March in its 2010 annual report, Volkswagen referred to Suzuki as an “associate over which Volkswagen has significant influence on financial and operating policy decisions.” Mr. Suzuki, a feisty 81, hit the ceiling, as he had assumed he was in “an equal partnership” (or something like that) with VW.

In other words, he got no respect, and that’s pretty important in Japan.

Aside from all the other problems that ensued (keep reading), the reason is that VW had purchased nearly 20 percent of Suzuki’s stock and, presumably, felt entitled to make that “associate” statement.

The Germans said last week they had no intention of selling their shares, as Suzuki had proposed, and they were tweaked because the Japanese company had made a deal to buy small, powerful diesels from Fiat. Not only tweaked, VW accused them of breaking the cooperation agreement.

Why did this dumb marriage come about in the first place? They courted each other because VW had technology and expertise in hybrid and electric cars, which Suzuki needed, and because Suzuki owned almost 50 percent of the small-car market share in India, where VW wants to play.

Suzuki wanted Fiat’s Multijet engine for its new Swift (right), and it claimed to have gotten nothing from VW except insults.

A future alliance with Fiat is indeed possible for Suzuki and has evoked some interest by CEO Sergio Marchionne. Fiat could use a better presence in Asia; Suzuki still needs Fiat’s (or somebody’s) expertise in small engines.

It’s getting so competitive in the global auto business now that alliances are all the rage. But cultural differences will always persist.

Was it a series of cultural differences that drove VW and Suzuki apart, or was it more a misalignment of their businesses?

—jgoods

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  1. Randy
    September 14th, 2011 at 18:12 | #1

    Suzuki continues to be an “also ran” marginal player in the markets. GM tried using them as a small car producer with mediocre results, and finally ended up putting the “S” on cookie-cutter GM cars. Problem is that Suzuki probably can’t survive making cars without one or more major partners, and who can think of a worse one than VW? That’s a company with real product problems and overlap with Suzuki. Frankly, the Koreans are eating them up in terms of product development. Maybe another bargain buy for TATA?

  2. September 14th, 2011 at 16:12 | #2

    Suzuki wants diesel expertise from Fiat at one time Suzukis came with the brilliant XUD9 form Peugeot but never got the common rail engines that Ford/PSA developed though BMW has jumped on that bandwagon for their MINI. Perhaps VWs bully boy tactics didnt suit the Japanese style.

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