Suzuki Reportedly in VW's Hands by Year-End

By Michelle Krebs December 7, 2009

Maybe tiny Suzuki Motor Corp. no longer has to be concerned that sales for its American Suzuki_MR_Wagon_Sport_kei_car.jpgSuzuki Motor Corp. unit have been evaporating towards near-nonexistence: information from Europe says the burgeoning Volkswagen Group has plans to take over Suzuki by the end of the year.


A report in Britain's Car magazine, authored by Georg Kacher -- a writer with historically reliable and highly-placed sources -- says VW has been negotiating for months to acquire Suzuki and that the company had planned to announce the consummation of the deal at the Tokyo motor show in October, but last-minute contractual negotiations delayed the timeline.

Now, Kacher says in Car, VW should announce by the end of the year it's completed a deal to own Suzuki, making the Japanese minicar specialist VW's 11th brand.

Ironically, VW -- which forged its own brand on the strength of inexpensive and economical compact cars -- reputedly wants Suzuki primarily to acquire the Japanese automaker's expertise in developing and manufacturing just that: cheap small cars.

Suzuki Prepping for Something?

A VW acquisition of Suzuki could dictate a rip-up of many of Suzuki's existing global Nissan_Pixo_2009.jpgalliances, many of which are centered around Suzuki's manufacture of subcompacts that are rebadged for other automakers in several world markets. The joint ventures include the Nissan Pixo, Opel Agila and Fiat Sedici. Suzuki also makes under contract the Japan market's popular, miniscule 660cc "kei" cars for several rival automakers, including Mazda Motor Corp. and Nissan.


In that context, it likely is no coincidence Suzuki just last week ended its longstanding alliance with General Motors Co. at the CAMI Automotive Inc. assembly plant in Ingersoll, Canada. Suzuki sold its entire 50 percent interest in CAMI to General Motors of Canada.

And Suzuki, in which many automakers have held past ownership stakes, now is almost entirely independent after a cash-strapped GM sold off the last of its 20 percent stake in 2008. Car reports Suzuki has a cash value of about $10.5 billion -- meaning VW, coming off its recent financial foray to absorb militant Porsche AG, probably will have to acquire Suzuki on the installment plan.

Suzuki's auto sales in the U.S. have been sliding desperately. The company sold a paltry 1,540 vehicles last month and has staggered to a total U.S. sales figure of just 36,810 with a month remaining in the year.

A VW takeover could mean an end to Suzuki auto sales in the U.S., as VW doesn't need any more small-car competitors in the U.S. market, even one tracking to move less than 40,000 vehicles this year. Volkswagen might choose to take over any Suzuki showrooms in desirable retail locations and fold the struggling auto-sales operations.

Emerging Markets VW's Chief Concern

The Car magazine report says VW is particularly anxious to step into Suzuki's existing production capacity in important emerging markets such as China, India, Indonesia and Thailand.

The story says VW wants to finalize the Suzuki purchase quickly in order to gain access to a VW_Up!_concept_car.jpglow-wage assembly plant (or plants) for the much-heralded Up subcompact -- a new, diesel hybrid concept version of the Up was revealed at this month's Los Angeles auto show -- scheduled for production in late 2011. The Up will have to cost much to manufacture less than any existing VW.


VW reputedly wants to build the first Ups in India (where Suzuki already has a coveted manufacturing and market presence), later to expand manufacturing to China and Thailand. The car is not based on VW's next-generation front-wheel-drive platform, so it is ripe for component sharing with existing Suzuki parts.

Any new gambits to expand into regions with low-cost assembly capacity are almost certain to raise red flags with Germany's increasingly prickly labor unions, however, which have raised objections to recent deals with large-scale labor implications, including GM's now-aborted sale of its Adam Opel AG unit.

Apart from access to low-cost assembly plants, Volkswagen reckons it also can leverage Suzuki's obvious motorcycle-related expertise that includes small-displacement engines, sophisticated transmission technology and chassis-related engineering, all of which could come in handy for future microcar development.

And despite it's increasingly shaky presence in the U.S., Suzuki is a major producer. Car's numbers peg Suzuki's 2008 output at 2.4 million passenger vehicles, 3.6 million motorcycles and scooters and more than a quarter-million badge-engineered passenger vehicles such as those made in Europe for Nissan, Fiat and Opel. -- Bill Visnic, Senior Contributing Editor

Photos by Suzuki

1. MR Wagon Sport one of Suzuki's many kei microcars for which Japanese size and engine-displacement taxation has created a popular niche.

2. European Nissan Pixo subcompact made in joint venture with Nissan.

3. Volkswagen needs a low-wage assembly plant or three for the production version of the ballyhooed Up subcompact, shown here in its original concept form.

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LEAVE A COMMENT

wtd44 says: 4:58 PM, 12.07.09

My experiences with Suzuki motorcycles indicate that the company has a lot of truly impressive competency in power train technology. And the history of the beginnings of the company are quite colorful as well. I look forward to seeing products on the market displaying the blend of the two companies.

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