VW-Suzuki tie-up for Indian small car market struggling
11 March 2011
Germany's Volkswagen, Europe's biggest carmaker, has admitted that its year-old partnership with Japan's Suzuki has so far yielded no results, and blamed cultural differences and slow decision-making at the Japanese carmaker for the delays.
The revelation, made by VW's chief executive Martin Winterkorn in Wolfsburg, Germany on Thursday, exposed how Europe's top-selling carmaker has hit snags in its aim to gain a foothold in the fast-growing Asian small-car segment – the main motivation behind its €1.7 billion ($2.3 billion) deal to buy just under 20 per cent of Suzuki.
The problems with Suzuki add to the headaches facing Ferdinand Piëch, VW's chairman, as he seeks to expand its car and truck empire and overtake Toyota of Japan as the world's biggest carmaker by 2018.
VW's planned merger with Porsche could be postponed or even abandoned due to tax and legal issues, and its efforts to combine truckmakers MAN of Germany and Scania of Sweden have made little progress.
With its stake purchase in late-2009, VW had planned to make Suzuki a global centre of excellence for development of very small cars while boosting its presence in India. Maruti Suzuki – the Japanese company's Indian affiliate – controls just over half of the country's car market.
While Volkswagen has been independently expanding operations in India through group companies VW, Skoda and Audi, it is also expected to go in for a major push with the help of new partner Suzuki. However, the market remains doubtful about the way forward as there has been no major announcement over the joint approach.