Volkswagen Suzuki future takeover talk weigh heavy on stock and stake

“I don’t rule out this possibility.” This has got to be amongst the biggest developments the auto industry could expect at the moment. Though it is unclear as of now which Volkswagen AG senior manager said this to the German weekly magazine Der Spiegel, the reference is in context to Volkswagen AG taking vying for a majority stake in Suzuki Motors Corp.

The report in Der Spiegel clarifies that Volkswagen AG would have the ability to increase their stake in Suzuki with the latter’s approval while the alliance is in play. If both choose to part ways with Suzuki calling off the alliance, VW can easily increase their stake as the company would be under no legal obligation and this laves them free to buy a majority in Suzuki.

There has been co clarification from the Volkswagen spokesperson yet. It all dates back to 2009 when Volkswagen bought a 19.9% stake in Suzuki valued at approximately 1.7 billion euros. The mutually beneficial association saw Suzuki use a part of the money to purchase a holding, roughly about 1.5% in Volkswagen AG.

The 19.9% Suzuki stake for Volkswagen was the chosen approach for the latter to make use of Suzuki’s small-car segment know-how and tech, and in this way advance in the Indian car market based on a winning combination. It has been two years but both companies didn’t seem to move ahead in terms of sharing technology for electric cars or hybrids, and jointly none ventured into emerging markets.

Earlier in march 2011, Volkswagen  AG in their annual report stated they’intended to significantly influence Suzuki’s decision-making process.’ Suzuki didn’t agree and was obviously not in unison with such an approach.

In May 2011, Martin Winterkorn , Volkswagen Chief Executive Officer said that Volkswagen AG looks forward to  venturing into the small car segment in India. This was likely to be a joint effort with Suzuki that would entail development of alternative-drive technologies and parts procurement.
In June 2011, Suzuki chose Fiat, the company’s long term engine partner for the Hungarian-built SX4 crossover. The powertrain in question was a 1.6-liter diesel engine. This didn’t go down well with Volkswagen.

In July 2011, Osamu Suzuki mentioned that Suzuki didn’t find any VW technologies the company could use after thoroughly reviewing what Volkswagen AG had to offer. He further clarified that Suzuki was willing to form alliances elsewhere.

In the same month, Hans Demant, in charge of the alliance at VW spoke against any ambitious plans the company may have. His spokesperson clarified that “Volkswagen and Suzuki are and will remain two independent companies. No increase of Volkswagen’s Suzuki stake has been agreed upon.”  Harayama, in charge of the alliance at Suzuki  said “It was made very clear when we tied up with Volkswagen that we did not want to become consolidated, and that we would remain independent.”

In August 2011 Chairman Suzuki said “Volkswagen keeps talking to the media, but not to us directly.”

That brings us to the current day. Last week saw Suzuki mention they want to undo their Volkswagen tie up, and looked at buying back the 19.9% stake the European giants have. Suzuki was willing to finance the deal and pay in cash immediately. The bomb that dropped later saw most astounded when Volkswagen said they don’t wish to sell their 19.9 stake in Suzuki.