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After Divorcing VW, Suzuki Joins Toyota in Partnership Talks

Oct. 12, 2016
Toyota and Suzuki just began examining opportunities to collaborate on research and development.

Suzuki Motor Corp. (IW 1000/145) said it’s exploring collaboration with Toyota Motor Corp. (IW 1000/6) amid unprecedented costs to make cars safer and cleaner, one year after the smaller Japanese automaker extricated itself from a failed partnership with Volkswagen AG.

Toyota and Suzuki just began examining opportunities to collaborate on research and development, the companies said in a joint statement. Suzuki stands to gain more from a partnership limited to R&D. Its Toyota City, Japan-based peer has budgeted 1.07 trillion yen (US$10.3 billion) this fiscal year, more than seven times Suzuki’s planned spending.

“Smaller and medium sized carmakers are finding it hard to compete in the mid- to long-term not only in powertrain technologies but also in technologies for autonomous driving,” said Yoshiaki Kawano, an auto analyst at IHS Markit. “This is not a short-sighted strategy” and smaller companies like Suzuki “are forming relations with bigger companies with their future in mind.”

Chairman Osamu Suzuki’s talks with Toyota come more than a year after the 86-year-old ended an acrimonious partnership with Volkswagen that never yielded a single joint project. Suzuki’s greatest strength lies in India, where its Maruti Suzuki India Ltd. unit dominates with low-cost models. Toyota completed a buyout earlier this year of Daihatsu Motor Co., which is taking on more responsibility developing compact vehicles for emerging markets and is Suzuki’s main competitor in Japanese minicars.

The potential partnership also comes on the heels of major scandals hitting an auto industry under more pressure than ever to curtail its contribution to pollution. Volkswagen has earmarked 18 billion euros (US$19.9 billion) to cover the fallout of rigging diesel engines with software to cheat emissions tests. Mitsubishi Motors Corp.’s improper testing for fuel economy dating back decades has led the carmaker to seek a rescue by Nissan Motor Co.

Nissan’s plans to buy a stake in Mitsubishi Motor, already its partner for development of Japanese minicars, could bolster its 17-year alliance with Renault SA by getting a better foothold in Southeast Asia.

Joining with Hamamatsu, Japan-based Suzuki would add to Toyota’s numerous tie-ups with Japan’s car and truck makers. Toyota said last year it would broaden technology-sharing with Mazda Motor Corp. It’s the majority owner of Hino Motors Ltd., the largest shareholder in Subaru maker Fuji Heavy Industries Ltd. and has a stake in Isuzu Motors Ltd.

 “As the environment which surrounds the automobile industry has been changing drastically, we need to have the ability to respond to changes in order to survive,” Toyota President Akio Toyoda said in the statement. “We would like to always keep our doors open for new partnership opportunities.”

Maruti Suzuki has increased its share of India’s auto market each of the last five fiscal years, reaching 47% for the period ending in March. Growth for the Delhi-based carmaker has continued this year thanks to models including the Vitara Brezza compact sport utility vehicle, which starts at 699,000 rupees (US$10,500).

By Craig Trudell, Yuki Hagiwara and Ma Jie

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Licensed content from Bloomberg, copyright 2016.

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