Tokyo/Berlin: Volkswagen will sell a Suzuki Motor Corp. stake valued at about 463 billion yen ($3.8 billion, Dh13.95 billion) following a decision from arbitrators that ended a four-year dispute over a failed partnership.
Volkswagen will sell its 19.9 percent holding after the arbitrators upheld the Japanese automaker’s request to end the cooperation, the companies said in separate statements on Sunday. The value of the stake, which VW bought from Suzuki in 2010 for 222.5 billion yen, is based on Friday’s closing price.
The end of the dispute provides Suzuki with the opportunity to find a new partner, after its cooperation with Volkswagen failed to result in a single joint project. The Japanese carmaker, which specialises in inexpensive cars, is pursuing a goal to boost annual revenue to 3.7 trillion yen by March 2020. It’s small compared to Volkswagen and other global competitors.
“It’s like taking out a tiny bone stuck in my throat,” Chairman Osamu Suzuki, who brokered the deal in 2009, said at a press conference on Sunday in Tokyo. “I feel refreshed.”
The goal of the partnership was to cooperate on small, fuel-efficient cars for emerging economies, providing Suzuki with access to technology while giving Volkswagen a wider role in the Indian market through Suzuki’s business there. Relations soured in 2011 after the Japanese company agreed to buy diesel engines from Fiat. As trust broke down, the companies accused each other of breaching the accord.
“After their irreconcilable quarrelling, the separation was unavoidable,” said Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg- Essen “Mr Suzuki didn’t want to be a VW employee, and that’s understandable.”
Even in winding down the relationship, the two companies were at odds. Suzuki said that Volkswagen has to sell the stake back to them or a party of the Japanese company’s choosing, while Volkswagen said the buyer of the stake hasn’t been decided yet. The German company, which has hired a bank for the sale, said it’s still analysing the ruling and will determine later to whom to sell the shares.
Suzuki also faces the prospect of having to pay damages after arbitrators ruled the Japanese company breached the agreement. The amount of any penalties would be addressed in a further stage of the arbitration proceedings, Suzuki said. The Hamamatsu-based company said it wouldn’t amend profit forecasts as a result of the ruling.
Volkswagen said it expects a “positive effect” on earnings and liquidity from the sale of the shares. It will decide next steps after analysing the ruling.
As it reviews its strategic options, Suzuki plans to remain independent. The one thing that’s clear is that it won’t be working with Volkswagen again.
“You don’t remarry someone whom you’ve divorced,” Osamu Suzuki said.
