VW allies with Suzuki

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VW allies with Suzuki

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Germany’s Volkswagen is to buy almost 20 percent of Suzuki for 1.7 billion euros.

VW Chief Executive Martin Winterkorn sealed the deal in Tokyo.

It is the latest car industry alliance aimed at reducing costs and developing new technologies in the face of fragile demand, chronic overcapacity and stricter environmental regulations.

Winterkorn said: “In partnership with Suzuki, the VW Group can take a big step forward in the compact car segment, particularly in the emerging markets in Asia. In turn, Suzuki can benefit from our experience with efficient and environmentally friendly drivetrain and vehicle technologies.”

The deal will help VW tap into the Japanese firm’s expertise in small cars and its dominance in India where sales growth remains strong, along with China, where VW is the number one foreign carmaker.

They will develop hybrids and electric vehicles together.

The shares of both companies rose.

In Frankfurt, analyst Fidel Helmer of Bankhaus Hauck & Aufhäuser said investors saw the logic of the deal: “VW has definitely managed to get a foot in the door of the Asian market. The shares have reacted very positively. VW is on the right track to becoming world market leader. The stake in Suzuki is also a further step towards this.”

The Suzuki alliance is all part of Volkswagen’s plan to become the world’s largest carmaker, overtaking Toyota, by 2018 or possibly earlier.