Volkswagen forced to sell €3.4bn Suzuki stake

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Volkswagen AG will sell a Suzuki Motor Corp stake valued at about 463 billion yen (€3.4 billion) following a decision from arbitrators that ended a four-year dispute over a failed partnership.

VW will sell its 19.9 per cent holding after the arbitrators upheld the Japanese car maker's request to end the co-operation, 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 co-operation with VW failed to result in a single joint project.

The Japanese car maker, which specializes in inexpensive cars, aims to boost annual revenue to 3.7 trillion yen by March 2020. It is small compared to VW 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 co-operate on small, fuel-efficient cars for emerging economies, providing Suzuki with access to technology while giving VW 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.

 

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Sale dispute

“After their irreconcilable quarreling, 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 companies were at odds. Suzuki said VW had to sell the stake back to them or a party of the Japanese company’s choosing, while VW said the buyer of the stake hadn’t been decided. The German company, which has hired a bank for the sale, said it’s still analyzing 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 it 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 analyzing 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 VW again. “You don’t remarry someone whom you’ve divorced,” Osamu Suzuki said.