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Suzuki terminates pact with VW, seeks return of shares

November 18, 2011 16:28 IST

Suzuki Motor Corporation (SMC) on Friday said it has terminated the partnership pact with Volkswagen AG (VW) after two years of unsuccessful attempts to gain access to technology from the German firm.

SMC also said it will seek return of its shares from the German auto conglomerate through arbitration.

In 2009, SMC and VW had signed a deal under which the German firm picked up 19.89 per cent stake in the Japanese car maker for USD 2.5 billion. It included technology sharing agreement.

"Today, Suzuki terminated the partnership with VW. Suzuki will be seeking the return of its shares from VW in arbitration. I am disappointed that we have to take this action but VW's actions have left us no choice," SMC Chairman and CEO Osamu Suzuki said in a statement.

Comments from VW could not be immediately obtained. SMC alleged that VW did not allow it access to its core technology despite their agreement.

"It also became clear that there were differences between Suzuki and Volkswagen in the understanding of independence'.

Suzuki cannot therefore establish a relationship of mutual trust which is the basis for collaboration between the two parties," it added.

Suzuki said: "They (VW) have continued to refuse our attempts on numerous occasions to resolve these issues through negotiation."

Accusing VW Chairman Martin Winterkorn of reneging on his promise, Suzuki said: "I am more disappointed

that having shaken the hand of Dr Winterkorn in agreeing to this partnership, he has not honoured his commitment to grant Suzuki access to what was originally agreed."

In the absence of VW's cooperation and given its failure to do what was agreed, there is no basis for the partnership to continue, he added.

"With the cessation of the partnership there is also no basis for VW to hold on to Suzuki's shares. We will now work to restore the relationship between Suzuki and VW to its original state as independent parties who do not restrict each other's business. I call on Dr Winterkorn to honour this," Suzuki said.

SMC further said: "Unless Volkswagen AG effectuates the disposition of Suzuki shares to Suzuki or its designated third party immediately, Suzuki will begin arbitration, in order to re-establish the genuine independence of Suzuki by compelling the disposition of Suzuki shares to Suzuki or its designated third party."

On October 14 this year, SMC served Volkswagen with a "Notice of Breach" asking it "to take remedial action in accordance with the agreement".

SMC claimed VW did not take any remedial action. "As a result of the termination, the cross-shareholding alliance must be dissolved immediately and in so doing the parties will return to their independent status before the agreement," SMC said in the statement.

Volkswagen AG cannot increase or decrease its proportion of Suzuki shares without Suzuki's consent even after the termination of the Framework Agreement, it added.

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