VOLKSWAGEN VS. SUZUKI

The Partnership

• Prompted by the 2009 worldwide decline of auto sales
• Dec. 2009: Volkswagen AG purchased 19.9% of Suzuki's shares
• VW agreed to provide larger vehicle technologies to Suzuki
• Suzuki agreed to provide VW access to its small displacement motors and Indian presence

The Breakup: Nov 18, 2011

• Both companies could not reach an agreement
• Suzuki claimed that VW did not give it access to hybrid technology promise
• VW accused Suzuki of violating the agreement by procuring diesel engines from Fiat

The partnership further soured due to cultural differences and failed joint business proposals

Post Breakup

• Suzuki wanted to buy back its shares & sell back VW's shares
• Though Suzuki & VW wanted to file for arbitration both had suffered enough losses
• Suzuki had lost huge financial and technological support
• VW lost the opportunity to leverage into the growing Indian market

The emerging markets had a high demand for fuel efficient cars

Suzuki

• Founded as Suzuki Loom Works (1909) in the textile industry for 30 years before car manufacturing
• WW2 made cars "non-essential commodities" and for awhile they stopped production
• Took up production after the cotton market collapsed in 1952 with a need for affordable and reliable personal transpo

Found in Hamamatsu, Shizuoka, Japan, Suzuki specializes in manufacturing compact automobiles, motorcycles, all-terrain vehicles, and many other small internal combustion engines.

In 2011 they were the 9th largest automobile manufacturer in the world, and 4th largest in Japan

Volkswagen

• "The People's Car"
• Today, consists of 342 Group companies including: Audi, Bentley, Bugatti, Lamborghini, Porsche, and more
• Reached over 153 countries

German automobile manufacturer based in Wolfsburg, Germany, established in 1936 by the German Labour Front

Now the 2nd Largest Automaker in the World, having produced 3 out of the top 10 best selling cars of all time

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Analysis & Recommendations

The problem was that the two companies didn't work hard enough to understand that they were working between very contrasting cultures.

Industry Analysts

• Suggest that there is no need for VW to sell its stakes in Suzuki
• The stakes could prevent other competitors from taking over + there was no immediate financial need
• Suzuki could pay a premium to put the partnership past them, but it would have been best for both to have initially create mutual trust

Analysis

• Suzuki expected way too much from VW, but still needed more training on cooperation
• They wanted VW's influence but none of the tech they currently had on the shelves

Recommendations




>Compromise
>Ambassadors/ Cultural Mediators
>Research

The Way Forward

VOLKSWAGEN
>Better suited to partner with another auto manufacturer to tap into Small-Car markets like in India and Japan
>Could put up their own branch but would be more costly

SUZUKI
>Needed VW more for hybrid technology
>Better suited to partner with Fiat since they are already familiar with each other's business methods