Suzuki has served Volkswagen with a legal notice accusing the German carmaker of breaching their co-operation agreement and demanded the right to buy back VW’s stake, propelling the two companies’ dispute over their soured partnership into the legal sphere.
The Japanese carmaker claimed in the notice, delivered to VW’s Wolfsburg headquarters on Thursday evening, that the German company had breached their partnership “a number of times” since it was agreed in December 2009.
At the time, the two companies agreed to co-operate on technology such as electric and hybrid cars and diesel engines – where VW is strong – and in India, where Suzuki is the market leader. Suzuki on Friday said VW had not allowed it access to its technology, and demanded that its partner “remedy its shortcomings with regard to the agreement.”
“I remain disappointed that we have not received what we were promised”, said Suzuki’s chairman Osamu Suzuki. “If Volkswagen will not allow access it must return Suzuki’s shares.” VW owns a 19.9 per cent share of its smaller partner, and Suzuki owns 1.5 per cent of the German carmaker, which on Friday said it had delivered a record 6.1m vehicles in the year to end-September.
Before the alliance collapsed, people inside VW had spoken of making Suzuki the group’s centre of excellence for developing very small cars, in which the Japanese group is a market leader, but where VW has historically struggled.
Friction between the two companies burst into the open last month, when VW accused Suzuki of infringing the co-operation agreement when it agreed a deal to buy diesel engines from Fiat in June.
VW said at the time that it “still regards Suzuki as an attractive investment”, but Mr Suzuki demanded a “divorce” from VW. On Friday VW said that it was “considering all alternatives”, and would decide on how to proceed once it had reviewed its options.
“We are at a complete loss to understand why the action has been taken and consider the accusation levelled by Suzuki to be unfounded since Volkswagen has always respected the agreements that are in place,” VW said.
It said that it had “done everything possible to make the partnership a success”. Despite the row with Suzuki, the company said it was not yet willing to disband the partnership or sell its stake.
A person close to VW said the carmaker was concerned that if the partnership collapsed, Suzuki could potentially seek another tie-up with one of the German group’s rivals.
This rival company would then gain access not only to Suzuki’s much-prized knowhow and Asian markets, but details of VW’s own technology and strategy, which it insists it has shared extensively over the last two years.
Despite VW’s assertion that it has no plans to sell or raise its equity stake in Suzuki, German media have speculated that it might one day seek to gain a majority of its now estranged partner.
Suzuki claims that neither of the two companies can increase their shareholding in the other without the consent of the other party. Details of their framework agreement on the partnership, which is confidential, are not available.
In a research note published last month, Deutsche Bank said Suzuki could “easily repurchase” VW’s stake by selling its own shares in the German company and with cash on hand, which the bank estimated at Y294bn ($3.8bn).
Even before Suzuki’s latest move, most market analysts had written off the notion that the two companies could reconcile.
“Apart from capital, there’s nothing invested in this partnership,” said Kurt Sanger, analyst at Deutsche Bank. “They will eventually walk away, but right now it’s a standoff between two proud companies.”