VW to Buy Stake in Suzuki

Wants to have solid market in India

Volkswagen will take a nearly 20% stake in Suzuki for more than $2.5 billion, giving VW a solid footprint in the Indian auto market, the companies said on Dec. 9.

Europe's biggest carmaker, which hopes to unseat world leader Toyota, already has a strong presence in China but wants to expand its Asian reach in an alliance with the Japanese compact car maker.

Tokyo-based auto analyst Tatsuya Mizuno at Mizuno Credit Advisory said "the alliance may accelerate a reshuffle" in the industry. "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. "For VW, Suzuki is attractive as Suzuki is strong in small car businesses in developing countries, in particular India."

The two companies said that they "plan a joint approach to the growing worldwide demand for more environmentally friendly vehicles."

Both firms had "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."

VW chairman Martin Winterkorn told a Tokyo news conference that "Suzuki is a world leader in the compact and sub-compact car segment, and Suzuki is one of the world's leading motorcycle manufacturers. The company is very strong in Japan and Southeast Asia and Suzuki-Multi is by far the number one car maker on the Indian market."

The chairman of the Japanese company, Osamu Suzuki, praised VW's "exquisite advanced technologies" and strong positions in Europe, South America and China. "Suzuki, on the other hand, has the advantage in manufacturing low-cost compact cars," he added.

General Motors pulled out of Suzuki last year ending an alliance that started in 1981. 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."

For VW, the agreement is another step in its plan to overtake Toyota as the world's biggest automaker by 2018. "Eight to 10 years from now, we want to become number one in the world, and I believe that we'll be able to accelerate that into happening with cooperation with Suzuki," Winterkorn said.

The chairman of Suzuki said the Japanese company seeks to become an "equal partner" with the German automaker, not one of the brands owned by it.

VW has just bought 49.9% of the German luxury sports car maker Porsche and will take it over 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 complement its Swedish truck unit Scania. VW already owns around 30% of the shares in MAN and could aim to create a strong commercial vehicle division with the two companies.

Copyright Agence France-Presse, 2009

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