2013 Suzuki KizashiEnlarge Photo
A multi-year ordeal involving Suzuki and Volkswagen will soon be at an end, with the German automaker ordered by an arbitration court to sell its 19.9 percent stake in the Japanese firm.
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The ordeal goes back to 2009 when VW first bought the stake in Suzuki in an effort to expand into emerging markets in Asia, namely India where the Japanese firm has a strong presence. The two also hoped to lower development costs for their respective compact models. However, within two years there was already bickering between the two which culminated in Suzuki agreeing to purchase diesel engines from Fiat.
VW argued that this went against its own agreement with Suzuki while the Japanese firm denied that the move was against the terms. This led to Suzuki requesting an end to the business and capital alliance with VW in early 2011. With no response coming from the German side, Suzuki in November of 2011 went to the International Court of Arbitration in London to have the matter settled.
The arbitrator has decided that Suzuki’s request to have the agreement terminated should be upheld and that VW divest its shares in Suzuki to either Suzuki itself or a third party designated by the Japanese firm. However, the arbitrator accepts that Suzuki did breach the agreement and thus the Japanese firm may be forced to pay some damages pending the outcome of further arbitration proceedings.
In a statement, Suzuki said it plans to acquire the shares from VW and that the details regarding the buyback will be announced at a later date. As a result, Suzuki’s share price has risen—so much so that VW is expecting a “positive effect” on earnings and liquidity from the sale of the shares.