Volkswagen buys into Suzuki for its expertise in small cars
By Chang-Ran Kim |
December 10, 2009, Thursday
|
Print Edition
Print Edition
VOLKSWAGEN is to buy a 20 percent stake in Suzuki Motor for US$2.5 billion, giving the German company access to the Japanese firm's expertise in small cars and dominance in India.
With the global car industry facing still fragile demand, chronic overcapacity and stricter environmental regulations, pressure has grown on auto makers to join together to reduce costs and develop new technologies.
Earlier this month, PSA Peugeot Citroen of France and Japan's Mitsubishi Motors Corp said they were exploring deeper ties, which have so far been limited to a project-based partnership.
"This comes right after the Mitsubishi deal and shows that foreign car makers are coming to take stakes in Japanese firms, raising expectations of a reorganization in the autos sector," said Noritsugu Hirakawa, a strategist at Okasan Securities.
The latest deal will see Suzuki invest up to half the proceeds in VW shares, sending its shares up 3.5 percent in a weaker Tokyo market yesterday. Volkswagen rose 2.3 percent in Germany.
"This is an interesting combination that comes with mutual benefits," said Aizawa Securities analyst Toshiro Yoshinaga. "Suzuki has a solid position in India and the same is true for Volkswagen in Europe."
VW would provide Suzuki the technology to make the hybrid and electric cars it lacks in its line-up.
Executives at Volkswagen have said publicly in recent months that Suzuki would be an interesting target given its expertise in small cars - a key segment to compete in fast-growth emerging markets.
"In partnership with Suzuki, the VW Group can take a big step forward in the compact-car segment, particularly in the emerging markets in Asia," CEO Martin Winterkorn said in Tokyo. "In turn, Suzuki can benefit from our experience with efficient and environmentally friendly drivetrain and vehicle technologies."
Volkswagen, with its 10 brands including Audi, Skoda, Seat and Porsche, sold 3.265 million vehicles in the first six months of 2009, Suzuki sold 1.15 million.
They are regarded as being among the stronger auto makers thanks to their exposure to China and India.
With the global car industry facing still fragile demand, chronic overcapacity and stricter environmental regulations, pressure has grown on auto makers to join together to reduce costs and develop new technologies.
Earlier this month, PSA Peugeot Citroen of France and Japan's Mitsubishi Motors Corp said they were exploring deeper ties, which have so far been limited to a project-based partnership.
"This comes right after the Mitsubishi deal and shows that foreign car makers are coming to take stakes in Japanese firms, raising expectations of a reorganization in the autos sector," said Noritsugu Hirakawa, a strategist at Okasan Securities.
The latest deal will see Suzuki invest up to half the proceeds in VW shares, sending its shares up 3.5 percent in a weaker Tokyo market yesterday. Volkswagen rose 2.3 percent in Germany.
"This is an interesting combination that comes with mutual benefits," said Aizawa Securities analyst Toshiro Yoshinaga. "Suzuki has a solid position in India and the same is true for Volkswagen in Europe."
VW would provide Suzuki the technology to make the hybrid and electric cars it lacks in its line-up.
Executives at Volkswagen have said publicly in recent months that Suzuki would be an interesting target given its expertise in small cars - a key segment to compete in fast-growth emerging markets.
"In partnership with Suzuki, the VW Group can take a big step forward in the compact-car segment, particularly in the emerging markets in Asia," CEO Martin Winterkorn said in Tokyo. "In turn, Suzuki can benefit from our experience with efficient and environmentally friendly drivetrain and vehicle technologies."
Volkswagen, with its 10 brands including Audi, Skoda, Seat and Porsche, sold 3.265 million vehicles in the first six months of 2009, Suzuki sold 1.15 million.
They are regarded as being among the stronger auto makers thanks to their exposure to China and India.
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