Suzuki’s decision to abort its alliance with Volkswagen follows a series of gradually worsening indicators about the state of the relationship.
The final straw for Suzuki appears to have been Volkswagen‘s reaction to the agreement between Suzuki and Fiat, under which the Italian company continues to supply its Multijet engine to Suzuki – a supply arrangement which pre-dated the VW alliance by several years.
No matter what the specific trigger for Suzuki’s decision, two broad issues – control and planning – underpin the failure of the alliance.
Project-specific ventures stand more chance of success than grand alliances.
At the time the alliance with VW was announced in December 2009, Osamu Suzuki, chairman and chief executive of Suzuki Motor made it clear that he did not intend the company he had led for three decades to come under VW’s control.
“I don’t want you to misunderstand: Suzuki is not becoming a 12th brand for Volkswagen,” Mr Suzuki said. “I don’t want other folks telling me how to do things.”
But when those “other folks” own 20% of your company, it is inevitable that they will want to exert some influence. In this respect Suzuki (the man and the company) was a little optimistic.
Although VW was undoubtedly the dominant partner, it would be a caricature to portray it as domineering and trying to add brands (not only Suzuki but also Maruti) to an already over-stuffed portfolio of car and truck brands.
However, like all the best caricatures, it contains some truth. VW is used to being in control. It has more experience of takeovers than of working as an equal partner. Its main experience of such alliances have been the AutoEuropa joint venture with Ford (1991-99), the earlier AutoLatina venture – also with Ford – and its co-operations with MAN and then Mercedes-Benz for van production.
An alliance’s prospects are enhanced when both partners enter it from positions of strength.
This lack of partnership experience was made evident at VW’s 2011 Annual General Meeting when chief executive Martin Winterkorn referred to difficulties the two partners were facing while making joint plans: “Working with a Japanese partner is not easy. In the West sometimes, we make decisions more quickly. In the Japanese culture, sometimes things are a little different.” However, he added: “We are making progress. We are in a phase with our colleagues from Suzuki where we are building mutual trust.”
The decision-making structures, cultural differences and building of mutual trust were among the issues that needed to be addressed before investing €1.7bn (US$2.35bn) in Suzuki, rather than being thought about 12-18 months afterwards.
This lack of detailed planning is also evident in the question of Suzuki’s relationship with Fiat. VW may claim that it was covered in the alliance agreement but clearly the two parties had different expectations. This, too, is something that should have been identified and clearly agreed beforehand.
Project-specific ventures stand more chance of success than grand alliances. Furthermore, an alliance’s prospects are enhanced when both partners enter it from positions of strength. In this case, ironically, it is Suzuki’s strength which has enabled it to assert its independence and declare its intention to walk away.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
A former OEM financial analyst, Jonathan Storey now works in the consultancy sector providing research, analysis and forecasting services for vehicle manufacturers, suppliers and regulatory authorities. He is the author of AutomotiveWorld.com‘s reports: “The World’s Car Manufacturers – a financial and operating review” and “The World’s Truck Manufacturers – a financial and operating review“. He is also co-author of “Electric Vehicles – prospects for battery, fuel cell and hybrid powered vehicles”.
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