Volkswagen buys 20% stake in Suzuki

The alliance would create a formidable new force in the global car industry by allowing Volkswagen, Europe’s biggest carmaker, to tap Suzuki’s strengths in small cars and its dominance in a fast-growing Indian market.

The partnership would also allow the automakers to pool management resources, share parts to cut down production costs and join forces in developing the next generation of fuel-efficient cars, the heads of the two companies said in Tokyo.

“Together, we can maximise our opportunities for growth. In partnership with Suzuki, the Volkswagen group can take a big step forward in the compact car segment, particularly in the emerging markets in Asia,” Volkswagen’s chief executive, Martin Winterkorn, told reporters in Tokyo. “In turn, Suzuki can benefit from our experience with efficient and environmentally friendly vehicles.  “In 8 to 10 years from now, we want to become No 1 in the world. I believe we will be able to accelerate that with the cooperation with Suzuki.” In the deal, which is subject to regulatory approval and is expected to close in January, Volkswagen will purchase 19.9 per cent of Suzuki’s issued shares for ¥222.5 billion, or $2.5 billion. Suzuki will invest up to half of that amount received from Volkswagen into shares of Volkswagen. The Volkswagen-Suzuki partnership is the latest in a flurry of realignments and alliances in the auto industry, which has been battered by falling demand in the United States and Europe and is facing stricter environmental standards in many markets.

Many manufacturers are eager to raise their profile in Asia’s fastest-growing countries — notably China and India — in a bid to tap soaring demand there.