Volkswagen Buys 19.9 Percent Stake In Suzuki

FOLLOWING REPORTS yesterday that Volkswagen and Suzuki were in discussions for a partnership, Volkswagen has today announced that it will take a 19.9 percent stake in the Japanese carmaker.

At a cost of $2.7 billion, the stake will give Volkswagen a foothold in India - where Suzuki holds a massive market share - and access to Suzuki's expertise in small cars.

"In a partnership with Suzuki, Volkswagen can take a big step forward in emerging markets," Volkswagen CEO Dr Martin Winterkorn told press in Tokyo.

“Two of the world’s leading car makers are joining forces and preparing to meet the growing challenges that lie ahead. Together we can maximize our opportunities for growth. We are proud to be cooperating with such an esteemed and valued partner” , Dr Winterkorn said.

Suzuki will use around half of the profits from the sale to buy a stake in Volkswagen, as part of a cross-shareholding alliance similar to that once held between Volkswagen and Porsche.

Speaking at a press conference in Japan, Dr Winterkorn was hopeful that the alliance with Suzuki would help the German company surpass Toyota as the world's number one carmaker.

"If that succeeds faster [than 2018], we're happy," Dr Winterkorn said.

Suzuki CEO Osamu Suzuki assured press at the same conference that Suzuki would not come under Volkswagen's control.

“We were very much impressed about the enthusiasm of Volkswagen towards manufacture of splendid automobiles," Mr Suzuki said.

"I don't want you to misunderstand: Suzuki is not becoming a 12th brand for Volkswagen," Mr Suzuki added. "I don't want other folks telling me how to do things."

The purchase is subject to the approval of the relevant authorities in both countries, with finalisation of the deal expected in January 2010.

The news follows Volkswagen's announcement earlier in the week that it would take a 49.9 percent stake in Porsche, following an agreement made in July.

In a statement, Volkswagen said Porsche “ideally complements the brand portfolio [and will] allow Volkswagen to further expand its position in the premium business, which offers particularly strong earnings” .