Suzuki planning to pull back from the alliance with Volkswagen

Suzuki’s alliance with German auto major Volkswagen may come to an end very soon. The much discussed alliance between Suzuki Motor Corporation and Volkswagen happened  in December 2009. To enter the alliance Volkswagen purchased  19.9 percent stake in Suzuki Motor Corporation, in return Suzuki purchased   1.5 percent stake in Volkswagen AG. According to latest reports, Suzuki expressed their willingness to pull back from this alliance  by both parties dissolving their stakes.

Suzuki VW Partnership Meeting Photo Suzuki planning to pull back from the alliance with Volkswagen

Ever since the Japanese-German collaboration came into existence, both the parties started to express their concerns about progress of this alliance. But the latest trouble erupted when Volkswagen accused Suzuki of breaching alliance terms by purchasing 1.6ltr diesel engines from Fiat for their latest SX4 sedans. Now VW has asked Suzuki to review their long term engine sourcing contract with  Fiat.

Countering VW’s claim Suzuki said the purchase contract with Fiat is not  a violation of the terms.

But VW sources said that VW is not planning to sell off their stakes in Suzuki and they wanted to continue to in the alliance.

This partnership has important  roles to play in markets like India where Suzuki is holding almost 50% of market share. Volkswagen who lacks in expertise in manufacturing and distribution of small car will have to spend lots of time, efforts and resource to develop the same. If the alliance is in place Suzuki would have contributed for brining  VW Up! to India. On the other hand Suzuki will have to sacrifice superior diesel technologies from Wolfsburg. But there are unconfirmed reports saying that VW’s TDI engines can not be fitted in Suzuki Swift and SX4. To make this possible Suzuki needs to redesign their car’s bonnets, which is again any manufacturer will not prefer. But developing a diesel engine with capabilities of Fiat’s Multijet engine or VW’s TDI engine will definitely call for huge investment.

So what could be future of this alliance..? Stay tuned for the rest of the story.
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