Suzuki wants to Dissolve Partnership with Volkswagen

In a move more or less anticipated after the recent publication of Volkswagen's internal review that accuses Suzuki of breaking a contract agreement between the two companies by purchasing diesel engines from Fiat, the Japanese carmaker said it will abort its alliance with the German group.Suzuki's announcement comes almost two years after it forged a partnership with Volkswagen. The German had acquired a 19.9 per cent stake in Suzuki Motor Corp in December 2009 for 225 billion Yen (then, approx US$2.5 billion) while the Japanese automaker agreed to invest up to one half of the amount received from the German automaker into shares of Volkswagen.
The two automakers were supposed to work on a variety of projects including the development of hybrid models, electric cars and fuel cells, with Volkswagen also taking advantage of Suzuki's leading position in the Indian market. However, none of this ever happened with the two sides barely even talking to each other, according to recent comments from the Japanese firm's chairman, Osamu Suzuki.
Suzuki says it never received the access it wanted to VW's technology.
However, as with many real-life divorces, Suzuki's intent to break up with Volkswagen may not go as smoothly as it wants.
While the Japanese carmaker issued a press release stating that it would like to dissolve the partnership by buying the Suzuki shares held by VW and sell back the VW holdings it has, the Germans do not appear to be willing to make such a move.
"We have no plans to sell our stake in Suzuki," Volkswagen spokesman Michael Brendel told AP/Yahoo Finance. "We are keen on continuing the cooperation," he added.
Scroll down to read the official press statement from Suzuki.

[Suzuki Press Release]
Suzuki made a Timely Disclosure regarding the Partnership with Volkswagen AG
Suzuki hereby announces that its board of directors has officially determined today dissolution of the comprehensive partnership and the cross-shareholding relationship with Volkswagen AG. On 9th December, 2009, Suzuki concluded the Framework Agreement with Volkswagen AG and both companies have made various discussions for about two years; however, Suzuki has come to the above determination for the following reasons.
1.Reasons for Dissolution of the Comprehensive Partnership and the Cross-shareholding Relationship
Based on a proposal from Volkswagen AG, Suzuki concluded the Framework Agreement with Volkswagen AG to proceed with partnership as “independent entities and equal partners.” Suzuki’s primary aim for the partnership was to receive technology transfer (including receiving technical information, etc.) from Volkswagen AG so that Suzuki could accelerate its development of environmental technology and other engineering areas to cope with intensifying competition of technology development in the worldwide automotive industry. In order to ensure such cooperative relationship, both companies agreed to have the cross-shareholding relationship.
However, Suzuki had to realize that with Volkswagen AG’s minor equity participation of 19.89% in Suzuki, it is difficult to receive technology transfer at the same or higher level as Volkswagen Group companies where Volkswagen AG has nearly 100% of voting rights. From the beginning of this year, Suzuki has been accelerating its development of own environmental technology and other engineering areas.
Suzuki thinks that it is crucial to secure “independence” in its operating policy decision for maintaining its competitiveness in the domestic Kei-car market and Asian markets including India. However, Volkswagen AG publicly reported that Suzuki was a “company over which Volkswagen AG has significant influence on financial and operating policy decisions”.
Taking account of these facts, Suzuki has concluded that it is difficult to attain its primary aim for the partnership and also there is concern that the partnership would cause negative impact on Suzuki’s autonomous decision-making in its operating policy. Therefore, Suzuki’s board of directors has officially determined dissolution of the comprehensive partnership and the cross-shareholding relationship with Volkswagen AG.
2.Dissolution of the Cross-shareholding Relationship
As Volkswagen AG requested equity participation, Suzuki accepted the proposal in order to realize the Suzuki’s above primary aim and transferred its shares to Volkswagen AG through the scheme of “third-party allocation of shares.” Since the purpose based on which Suzuki transferred its shares to Volkswagen AG will be lost upon dissolution of the partnership, Suzuki is going to request Volkswagen AG to dispose of Suzuki shares held by Volkswagen AG according to Suzuki’s intention.
Regarding the shares of Volkswagen AG that Suzuki currently owns, if Volkswagen AG disposes of its Suzuki shares in line with Suzuki’s intention, Suzuki also will dispose of its Volkswagen shares in line with Volkswagen AG’s intention.
Suzuki has been proceeding with successful business cooperation with domestic and foreign automotive companies without equity relationship. Suzuki believes that if relationship with Volkswagen AG becomes that of “true business partnership” after dissolution of the cross-shareholding relationship, both companies would have good environment where successful cooperation can be built up in fields that both companies gain benefit from.
3.Future Prospects
Discussions between both companies are expected to be organized as to dissolution of the comprehensive partnership and the cross-shareholding relationship. Suzuki will make announcement as soon as both companies reach final conclusion including timing of dissolution, etc.

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