Two heavyweights of the motoring industry will combine their collective might as Volkswagen AG and the Suzuki Motor Corporation sign a framework agreement to establish a long-term strategic partnership.
Volkswagen will buy 19.9 per cent of Suzuki’s issued shares in a deal worth around $2.3billion with Suzuki intending to invest up to 50 per cent of the amount received from Volkswagen into shares of the German manufacturer – currently VW stock is limited so the initial Suzuki purchase will be around $569million. The transaction is still subject to approval and is expected to be finalised in January, 2010.
According to statements from the two companies, they complement each other in terms of their product portfolio, as well as manufacturing capacities and global distribution. They hope to form a joint approach to the growing worldwide demand for more environmentally friendly vehicles with Professor Dr Martin Winterkorn, chairman of the board of management of Volkswagen AG, commenting that “sustainable mobility” is the top issue of the future.
They are expected to establish a co-operative relationship while still respecting each other as stand-alone entities. They will focus on achieving synergies in areas of rapidly growing emerging markets as well as in developing and manufacturing innovative green cars.
With demand for smaller cars and powertrains with better fuel efficiency on the increase, Volkswagen and Suzuki will look to produce cars with a lower carbon dioxide (CO2) footprint.
At the moment, Suzuki is a world leader in the mini-car segment having sold 2.3million vehicles and 3.1million motorcycles in the 2008/2009 financial year. It has also engaged in a strategic alliance once before – on that occasion with General Motors in 1981 with GM ultimately holding 20 per cent of the company, but that was reduced to three per cent in 2006.
