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Volkswagen Suzuki Partnership Officially Terminated Photo:

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Trevor Collett | Aug, 31 2015 | 1 Comment

Volkswagen and Suzuki have called it quits on their partnership, following a ruling handed down by the International Court of Arbitration of the International Chamber of Commerce in London.

But that is not the end of the matter; there will be bloodshed to follow in what will likely be a lawyers' picnic; Volkswagen has signalled its intent to pursue damages in a counter claim of breach of contract against Suzuki.

Suzuki had initiated the action, filing for international arbitration in November 2011, after Volkswagen AG refused to sell back its 19.9 percent stake in Suzuki.

The announcement of the ruling however was made by Volkswagen, the carmaker announcing it will now sell its stake in Suzuki - acquired in January 2010 for 1.7billion euros (US$1.9billion). That stake is now expected to be worth US$3.8billion.

Volkswagen said it expects “positive effects on the company’s earnings and liquidity” from the sale.

The German carmaker also said that arbitrators found Suzuki was “in breach of its contractual obligations to Volkswagen”, and Volkswagen can now pursue damages claims as a result.

Volkswagen said Suzuki broke its agreement by pulling the pin on a joint venture project at the end of 2010, and claims it was entitled to “last-call rights for the delivery of diesel engines”.

However, arbitrators found Suzuki has the ordinary right to terminate the agreement based on reasonable notice, and it was Suzuki that initiated the arbitration proceedings in 2011.

2009 Suzuki Alto
2009 Suzuki Alto

“We welcome the clarity created by this ruling,” Volkswagen said in its statement.

“The tribunal rejected Suzuki’s claims of breach and found that Volkswagen met its contractual obligations under the cooperation agreement.”

“Nevertheless, the arbitrators found that termination of the cooperation agreement by Suzuki on reasonable notice was valid, and that Volkswagen must dispose of the shares purchased.”

The partnership began in late 2009, and was supposed to deliver jointly-developed city cars for emerging markets.

Suzuki purchased around 1.5 percent of the ordinary shares in Volkswagen at the time, but its future plans for these shares are unclear at this stage.

MORE News & Reviews: Volkswagen | Suzuki | Partnerships

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