Suzuki to go it alone after failed Volkswagen agreement

Suzuki Motor Corp, smarting from its failed cooperation with Volkswagen AG, now intends to defend its hard-won independence.

Ending a dispute which dragged for four years, arbitrators upheld Suzuki's request to terminate a 2009 agreement that failed to yield a single joint project with Volkswagen.

The two companies had agreed to make energy-efficient small cars for emerging markets.

Volkswagen had acquired a 19.9-per cent stake in the Japanes car maker in January 2010 for $1.9 billion (See: VW acquires 19.9-per cent stake in Suzuki for $2.5 billion).

In turn Maruti had agreed to invest half the amount received in Volkswagen shares

Volkswagen will now sell its 19.9-per cent Suzuki stake, valued at about ¥463 billion ($3.8 billion) based on its 28 August closing price.

''The past six years have been a very valuable experience,'' chairman Osamu Suzuki, who brokered the deal, told reporters in Tokyo yesterday.

''I came to realize there are companies different from us,'' and as a result, independence will be a ''precondition'' for future dealings.

Suzuki, which specialises in inexpensive cars, is smaller than global rivals like Volkswagen, which sells about four times as many vehicles, which put pressure on the Japanese automaker to safeguard its dominance in India and control increasing costs of development for green-car technologies, even as it pursues a goal to boost annual revenue to¥3.7 trillion by March 2020.

According to Daniel Loeb, whose hedge fund Third Point LLC, disclosed in July that it bought a stake in the carmaker, Suzuki should focus on its India operations and Maruti subsidiary

Meanwhile, Suzuki said yesterday it would buy back the 19.9-per cent stake it sold to Volkswagen AG after the German auto maker was ordered by an international arbitration court to sell its holding.

The planned partnership broke up after Suzuki accused Volkswagen of seeking to control it and filing for arbitration in November 2011.

Both companies welcomed the ruling from the International Court of Arbitration of the International Chamber of Commerce, which partially upheld the German company's counterclaims of breach of contract.

''It used to feel as if a small bone were stuck in my throat,'' Suzuki chairman and chief executive Osamu Suzuki said at the news conference. ''I feel so refreshed now.''

According to Suzuki, it foresaw no impact on its full-year earnings.
 
The Japanese auto maker's shares shot as much as 4.6 per cent early on Monday, before trading flat, still outperforming a 1.2 per cent decline in the benchmark Nikkei average.

''While we believe investors might react favourably to news of the share buyback, we basically think all of this is already priced in,'' JPMorgan analyst Akira Kishimoto said in a report.