Volkswagen and Suzuki link up

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Indy Lifestyle Online

German car-maker Volkswagen is entering into a long-term strategic partnership with Suzuki of Japan. The relationship will be cemented via the establishment of a cross-shareholding between the two companies; VW will buy 19.9 per cent of Suzuki, which will in turn invest up to half of the proceeds in Volkswagen shares.

Volkswagen has attempted to strengthen the Asian leg of its operations before. For example, it is one of several companies that have been mentioned as potential suitors for the Malaysian Proton operation, and has substantial activities in China, where it has invested both directly and in cooperation with joint-venture partners. The focus of VW's interest, however, is probably neither China nor Japan but India, where Suzuki has a majority stake in Maruti Suzuki, the first real mass producer of cars in that country.

The record of alliances between Japanese car-makers and their American and European counterparts is mixed. Mitsubishi Motors' links with Chrysler and Daimler didn't really work out; now Mitsubishi has paired up with Peugeot-Citroen, with which it has already cooperated on individual cars. Much more successful is the wide and deep alliance between Renault and Nissan that has operated since 1999. General Motors has previously been linked to both Subaru and Suzuki but has since drawn back from many of its overseas ventures; it will be interesting to see whether the remaining GM/Suzuki car programmes – such as the Vauxhall Agila/Suzuki Splash – form an obstacle to cooperation between Suzuki and VW.

VW and Suzuki say "both companies will establish a cooperative relationship while respecting each other's independence as a stand-alone entity". It therefore seems unlikely that Suzuki will follow the approach of other companies that have come into VW's orbit of simply relying on the German group's parts and platforms for new products – or at least not initially. In fact, Suzuki's previous cooperative arrangements have generally involved the Japanese company taking a technical lead.

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