Volkswagen & Suzuki - it's handbags at dawn

Volkswagen Suzuki Partnership - things aren't exactly rosy

The spat between VW and Suzuki continues, with Volkswagen demanding Suzuki ‘remedies’ its decision to buy engines from Fiat.

Back in 2009 Volkswagen invested a rather large chunk of change (around €2 billion) in Suzuki in exchange for a 20% stake in the Japanese car maker, and there were big hopes for advantages for both parties.

Volkswagen were looking for a quick-fix route to the burgeoning car market in India, where Suzuki were doing very well, with sales in India last year of 1.13 million cars – almost half its production – in comparison to VW’s paltry sales of just 53,000.

In return, Suzuki were expecting to get a quick route to cutting-edge hybrid and electric tech for their range, and access to VW’s engines. But it’s all gone a bit Pete Tong.

The handbags at dawn scrap we now have stems from VW’s rather insensitive comments in its annual report this year where it stated that VW could “…significantly influence financial and operating policy decisions” at Suzuki and went on to refer to Suzuki as an ‘associate. German arrogance at its best.

As a result of that significant slight – never a good move considering Japanese sensitivities about honour – VW and Suzuki fell out (which may be why the new Suzuki Swift Sport didn’t get the Polo GTI engine as we expected) with Suzuki boss Osamu Suzuki proclaiming this month that the two companies were no longer on speaking terms.

The pressure has now been put back on Suzuki with a statement from VW demanding that Suzuki ‘remedies’ an infringement in their agreement, after Suzuki agreed to buy Fiat engines for Suzukis made in Hungary. A VW statement yesterday said:

Suzuki has now been given a period of several weeks to remedy the infringement. Volkswagen considers this step regrettable, but necessary, and has offered to discuss the matter with Suzuki.

Can the VW Suzuki ‘association’ get back on track, or are German and Japanese business cultures too diverse to ever be successful? We’ve struggled to find any German/Japanese alliances that have worked (apart from one in the 1940s – for a while) but it would be a shame to see a deal which should benefit both parties go sour because the Germans are insensitive and the Japanese touchy.

We’ve not heard the end of this.