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Volkswagen and Suzuki to Establish Strategic Partnership; VW to Take 19.9% Stake in Suzuki, Suzuki to Invest in VW

Volkswagen AG and Suzuki Motor Corporation have signed a framework agreement to establish a close long-term strategic partnership. To support a smooth development of this relationship, Volkswagen will purchase 19.9% of Suzuki’s issued shares, in a deal worth about ¥200 billion (about US$2.3 billion). The closing of the transaction is subject to approval of the relevant authorities and is expected in January 2010. Suzuki intends to invest up to one half of the amount received from Volkswagen into shares of Volkswagen.

Because of limited availability of VW stock, the initial Suzuki purchase will be around ¥50 billion (US$569 million), said Osamu Suzuki, Chairman, President, CEO and COO of Suzuki during a press conference in Tokyo.

The two companies said that they complement each other in terms of product portfolio, global distribution and manufacturing capacities. The companies plan a joint approach to the growing worldwide demand for more environmentally friendly vehicles.

Sustainable mobility is the top issue of the future. That’s why it is right at the top of the agenda of our partnership. Apart from efficient combustion engines, we will also be focusing our attention on alternative drivetrains such as hybrids and electromobility.

—Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen AG

The two said that in the automotive industry, where globalization and diversification proceed in parallel, they will establish a cooperative relationship while respecting each other’s independence as a stand-alone entity. Both parties are focused on achieving synergies in the areas of rapidly growing emerging markets as well as in the development and manufacturing of innovative and environmentally friendly compact cars.

As demand continues to rise for smaller cars and for powertrains with higher fuel efficiency and lower CO2 output, Volkswagen and Suzuki will offer a solution for customers in emerging markets buying a car for the first time and also for customers in advanced economies seeking to lower their CO2 footprint.

On what are we going to focus?...There are so many things. Suzuki has our own ideas where the priorities should be, and we have already shared those with Volkswagen. And Volkswagen also has a list of priority items which has been shared with us. We are both presenting our lists and are comparing notes so that we can start from where that would benefit both of us. We signed the agreement today, so starting tomorroww we will start the process of deciding the priroity areas. We can’t afford to spend a lot of time on this, we want to be speedy. I think that will benfit both Suzuki and Volksawgen.

—Osamu Suzuki

Suzuki is a world leader in the mini-car segment, and sold 2.3 million vehicles and 3.1 million motorcycles in the 2008/2009 financial year. In fiscal year 2008 Volkswagen sold 6.3 million vehicles.

Suzuki had established a strategic alliance with General Motors in 1981, which ultimately resulted in GM holding 20% of the company. In 2006, that began to unwind, with GM reducing its holding to 3%.

We never expected what happened recently to happen. What happened to GM was a surprise to US. In 2006, they decided to sell 20%—that marked the end of the strategic relationship between the two companies...Based on experience, partnering with overseas automakers does pose challenges.

—Osamu Suzuki

Comments

kelly

"We never expected what happened recently to happen." - Osamu, their numbers were circling the drain for years.

arnold

"Based on experience, partnering with overseas automakers does pose challenges."

Hopefully they will find it easier second time around.

Sounds like a good strategic alliance with both co's serious about technological solutions.

I think they will both do well from this.

SJC

Suzuki and VW could make a nice PHEV and keep the price down if the cost of batteries gets better. I could see 10% of the cars sold being HEV/PHEV in the next 10 years. Cleaner air and less imported oil are the rewards.

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