Suzuki Splits With GM, Hooks Up With VW

TOKYO — Japan's Suzuki Motor has ended its longtime affiliation with General Motors and has agreed to sell a 20 percent stake to German auto giant Volkswagen for $2.5 billion.

The alliance with Suzuki will give VW access to the Japanese automaker's formidable skills in designing and building high-quality, low-cost small cars and will enable it to leverage Suzuki's strength in India and across the ASEAN region.

At a joint press conference in Tokyo, VW Chief Executive Martin Winterkorn said: "Together, we can maximize our opportunities for growth. In partnership with Suzuki, the Volkswagen Group can take a big step forward in the compact-car segment, particularly in the emerging markets in Asia. In turn, Suzuki can benefit from our experience with efficient and environmentally friendly vehicles.... In 8-10 years, we want to become number one in the world. I believe we will be able to accelerate that with the cooperation with Suzuki."

Meanwhile, Suzuki and GM announced they will dissolve their partnership in CAMI Automotive, with GM acquiring Suzuki's stake in the joint venture in Ingersoll, Ontario. The plant builds the Chevrolet Equinox and the GMC Terrain. Production of the Suzuki XL7 ended there after the 2009 model run.

The CAMI joint venture was established in 1986, and production in Ingersoll started in 1989 with the Suzuki Sidekick and the Geo Tracker and Metro.

GM acquired a minority interest in Suzuki in 1981 and at one point held a 20 percent stake but sold the last of its holdings in 2008.

In Japan, a stake of 33 percent or more gives the shareholder effective management control of the company.

VW is widely expected to gradually increase its stake in Suzuki, as part of its relentless drive to overtake Toyota as the world's largest automaker. Earlier this week, it announced it had taken a 49.9 percent stake in Porsche as part of an ongoing takeover of the luxury sports-car brand.

As part of the deal announced here, Suzuki plans to invest half of the proceeds in VW stock.

Inside Line says: VW would like to trim the cost of its new Up! minivehicles — and Suzuki is the world master in the small-car game. — Peter Nunn and Paul Lienert, Correspondents