Car manufacturers Volkswagen and Suzuki have come to a disagreement about their partnership agreement. Volkswagen feels that the fact Suzuki have struck a deal with Italian car firm Fiat to source diesel engines breaks an agreement between the two companies.
However both companies seem to have different views as to whether a contract agreement was broken. Suzuki have “confirmed” that they have not broken any promises. All of this comes after Volkswagen purchased a 19.9 percentage in Suzuki for £1.4 billion in later 2009. Suzuki want this sold off along with their 1.5% stake in Volkswagen.
It has been mentioned that Suzuki, who plan to use the Fiat diesel engines in their SX4, has been using Fiat engines since 2006 and it would not be feasible to crossover to Volkswagen engines. Suzuki has said that the technology used by Volkswagen is a lot more expensive therefore it would be too much of a cost issue for Suzuki. Passing the extra expense to customers or paying out of their own pocket proves to be no go options for the Japanese company.
Volkswagen and Suzuki’s business partnership may come to an abrupt end after two years. However it would appear that Volkswagen doesn’t want any ties cut between the two. They seem to have given Suzuki another chance to “fix” the contract that was broken. However Suzuki may seek to find a new partner in business if they end their relationship with Volkswagen.
The reason the two companies got into business together was to help introduce Suzuki to diesel and hybrid technology and for Volkswagen to increase its popularity in India with assistance in creating small cars.
Following the announcement both Volkswagen and Suzuki have been affected in the stock market. Both companies’ shares have dipped.
Quarrels between the companies seem to have written on the wall since March. This came from Volkswagen’s annual report, with them claiming that they may have huge influence on Suzuki’s operations. Volkswagen are also said to have described Suzuki as an associate. Suzuki were not pleased at the type of statements that Volkswagen released.
Both companies may not back down and stand their ground. It would seem that they both can profit greatly from each other’s association, if they do stay together. It would be a shame not only to Volkswagen and Suzuki if they split up their partnership, but to the whole automotive industry.