Suzuki's path unclear after split

PHOTO: Japan News/ANN

The dissolution of Suzuki Motor Corp.'s capital tie-up with Volkswagen AG means that the Japanese automaker will go it alone in developing eco-friendly cars and carrying out other business operations, according to industry analysts.

However, it will not be easy for Suzuki to survive the fierce competition among car manufacturers on its own, given the massive amount of investment needed to build environmentally friendly automobiles. Therefore, questions remain about how far Suzuki can adhere to its policy of self-reliance.

The dissolution of the Suzuki-Volkswagen partnership could also further facilitate alliances among carmakers around the world, analysts said.

"It felt like it took a bit too long, but it's good to have a conclusion. It's like taking out a tiny bone stuck in my throat - I feel refreshed," Suzuki Chairman Osamu Suzuki said at a press conference at a Tokyo hotel Sunday.

The Japanese car producer's decision to form a capital and business partnership with Volkswagen in 2009 reflected its desire to gain access to the German automaker's green technology. The main factor behind the move was Suzuki's decision that there would be a limit to what could be accomplished through its own efforts for technological development.

General Motors Co. of the United States, which maintained a capital tie-up with Suzuki until 2008, respected the latter carmaker's management style. The breakdown in the Suzuki-Volkswagen partnership could be attributed to differences in their respective corporate culture, according to many observers.

To buy back its shares from Volkswagen, Suzuki will be forced to spend more than ¥400 billion (S$4.6 billion), nearly double the price of the original transaction.

At the press conference, the Suzuki chairman cited an improvement in the fuel efficiency of his company's minicars as one of its achievements it had gained while it was locked in the four-year dispute.

"A misfortune has been turned into a blessing," he said. "Thanks to the efforts made by our engineers, we've achieved most of what we aimed to with our partnership with Volkswagen."

Progress is being made in the formation of technical tie-ups among car manufacturers around the world, a development that has resulted from efforts to strengthen environmental regulations in the United States and Europe.

Suzuki's next move is now the focus of attention among carmakers, according to analysts. On Sunday, Chairman Suzuki only said, "We cannot afford to think about what's next. I want to think about it comprehensively."

When Suzuki passed the presidency of the company on to his eldest son, Toshihiro, in June, he indicated he would step away from active management when a settlement with Volkswagen came into view.

At the press conference, however, Suzuki indicated his intention to remain at the helm of the carmaker for the time being. "I'm not thinking of that [backing away from management] at all," he said.

Suzuki is developing hybrid models for its mainline minicars and compact vehicles, but lags behind other firms in fuel efficiency.

It is unclear how the company can create a wide-ranging lineup that includes electric cars and fuel-cell vehicles on its own.

Mazda Motor Corp. decided in May to strengthen its tie-up over green technology with Toyota Motor Corp.

Fuji Heavy Industries Ltd. also cooperates with Toyota on hybrid technology.

"Everyone is burdened with dealing with environmental regulations. It's tough to survive on your own," said a representative of a midsized manufacturer, a view many in the industry echoed.