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Suzuki, VW Finally Formerly End Cooperation Agreement

Suzuki, VW Finally Formerly End Cooperation Agreement.

Japanese May Have To Pay Damages For Pact Violation.

International arbitrators agreed that Suzuki could finally terminate its 2009 agreement with Volkswagen, although the Japanese company may have to pay damages to VW because the panel said it had breached the agreement.

The amount of possible damages was not disclosed.

Volkswagen was ordered to sell its almost 20 per cent stake in Suzuki which cost $1.9 billion in 2010 and is now worth about $3.8 billion

The cooperation plan between Suzuki and Volkswagen fell apart when the Japanese company ordered new high-tech diesel engines from Fiat and not VW. There had been rumblings before when Suzuki objected to being referred to as an associate company in VW’s annual report, with the implication that the German company could order the Japanese around.

Suzuki formally asked for the deal to be ended in September 2011.

In 2009, Suzuki and VW formed a partnership to develop small cars and new technologies. VW bought 19.9 per cent of Suzuki which in turn purchased a stake of about 2.5 per cent in VW. VW said it wanted to build a bigger presence in India’s small car market, while Suzuki sought access to VW’s diesel engines, hybrids and electric car projects.
Suzuki formally asked VW to dissolve the partnership. VW said Suzuki had violated the agreement, and was seriously miffed by its decision to buy diesels from Fiat, which eagerly stirred up the aggravation by mischievously talking about how Suzuki would make an interesting partner in Asia.

Analysts said Suzuki should now focus on its Indian operations and Maruti subsidiary.

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