Suzuki Cuts Ties With Volkswagen

Suzuki it will abort its alliance with Volkswagen AG following a nearly two-year marriage that never worked.

TOKYO (AP) -- Suzuki Motor Corp. said Monday it will abort its alliance with Volkswagen AG following a nearly two-year marriage that never worked. Even at what appeared to be the end of the union, the two companies seemed unable to agree as Volkswagen said it wanted the cooperation to continue.

Suzuki's board of directors decided to dissolve its partnership with the German automaker because of concerns that it would lose autonomy, it said in a statement. Volkswagen owns a nearly 20 percent stake inSuzuki, while Suzuki holds about 1.5 percent of Volkswagen.

Suzuki said it would ask Volkswagen to unload its Suzuki shares, which it would then buy back with its own financing, and that it would do the same with its Volkswagen shares if the two reach agreement.

"We have no plans to sell our stake in Suzuki," Volkswagen spokesman Michael Brendel said in a telephone interview. He did not say how the automaker might contest Suzuki's departure, but said talks were needed.

"We are keen on continuing the cooperation," he said.

Osamu Suzuki, Suzuki's chairman, said the deal, signed in December 2009, had been aimed at acceleratingSuzuki's development of ecological vehicles, such as hybrids, electric cars and fuel cells. But no such project was in the works nearly two years later, and the deal was taking up time and limiting Suzuki's operations, he said.

"It is like being married and getting a divorce," he said at a hastily called news conference in Tokyo. "Instead of criticizing each other, it is better to go through it with a smile."

He shrugged off questions that the talks to end the partnership may not go smoothly.

The automakers announced a promising partnership in 2009, establishing one of the world's biggest auto alliances. They said they would work together on product development, production and sales, with a focus on hybrid and electric cars.

Suzuki, which specializes in tiny cars called "kei" or minicars in Japan and other parts of Asia, was widely viewed as needing the prowess of the bigger Volkswagen to ride out intensifying global competition as the industry moves increasingly to green cars.

But speculation had been growing that the tie-up with Volkswagen wasn't going well because Suzuki began complaining in public.

The partnership with Volkswagen came after Suzuki lost its alliance with General Motors Co., which began in 1981. GM sold a 17 percent stake in Suzuki in 2006, and its remaining 3 percent stake in 2009.

For Volkswagen, the alliance represented an opportunity to boost its footprint in emerging markets.

Suzuki holds nearly half the market share in India, while Volkswagen is strong in China as well as in South America and Europe.

But the two companies could not agree on projects or how the partnership would function on the ground.Suzuki also said it never gained the sort of access it wanted to Volkswagen's technology.

The frustration appeared to be mutual.

Last week, Volkswagen accused Suzuki of violating the terms of its partnership by deciding to buy diesel engines from rival Fiat SpA. It gave Suzuki several weeks to address the issue.

Suzuki declined to say if any other partnerships were in the works.

"Even if we put everything into writing, if there is no heart-to-heart connection, then it doesn't work," Suzukisaid, adding he had learned a lot by working with Volkswagen.


Associated Press writer Yuri Kageyama contributed to this report.

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