Signs Volkswagen-Suzuki global alliance in trouble

A verbal battle has broken out between top officials of Suzuki Motor Corporation and Volkswagen AG, hinting the alliance between the global carmakers is in trouble.

In any case, technology sharing between the two hasn’t happened 18 months since the alliance was announced.

Fractures surfaced when the German carmaker accused its Japanese partner of non-cooperation in an interview with a German magazine.

Now, Osamu Suzuki, the helmsman of the Japanese car major, said in a blog post that none of Volkswagen’s technologies are interesting enough to be adopted and that for the time being, Suzuki is in no hurry to collaborate in critical markets such as India.

“Does Suzuki face an immediate difficulty? The answer is ‘Not at all.’ We learnt about Volkswagen’s technologies, but we did not find any one of them interesting enough to adopt immediately … We are producing more than 200,000 units of our diesel engine, which is attracting a lot of attention in India. Thus, for the time being, particularly in critical markets like the minicar market and India, we are not in a hurry to collaborate with Volkswagen,” Suzuki said last week.

Automobile industry experts agree nothing much has worked out for the two companies in India. There was a proposal for rebadging of some Maruti Suzuki cars (specifically the A-Star, which is already selling in Europe as Nissan Pixo and the WagonR) till the beginning of this year, but this also is no longer on the cards.

Even visits by the Volkswagen teams to Maruti’s factories, done in the initial months of the alliance, have stopped.

Hormadz Sorabjee, editor of Autocar India, says as far as he is concerned, “the alliance is only on paper. There appears to be a clash of cultures... Eventually, Suzuki will need some technology and a long-term alliance, but then, it already has a diesel technology pact with Fiat. They don’t need Volkswagen diesel technology at all.”

Suzuki also points out that the Volkswagen management has been “telling their shareholders that it can largely influence the corporate policy of Suzuki. I feel somewhat uncomfortable with the statement because the two companies agreed to remain independent partners on an equal footing when we signed the partnership in the first place … people of Volkwagen may develop a mistaken impression that Suzuki is placed under their umbrella … we cannot simply accept this notion.”

Though Suzuki held out an assurance of continuing dialogue to build a relationship of equality, doubters are many.

In December 2009, Volkswagen bought a 19.9% stake in Suzuki and then Suzuki bought 2.5% in the German carmaker in return.
Since Suzuki owns 54% stake in Maruti Suzuki India, the alliance was expected to have a significant impact on Indian operations of both companies.

While Maruti sells every other car bought in India, Volkswagen still has only a negligible presence in India.

The alliance was supposed to let Maruti share Volkswagen’s diesel platform (Maruti has access to only 1.3 litre diesel engine as of now), while Volkswagen was to have firm footing in the world’s fastest growing passenger vehicle market —
India — on way to displacing Toyota Motor Corp as the world’s largest carmaker.