Moody’s: VW dispute with Suzuki, negative for credit image

The alliance between Volkswagen and Suzuki seems to generate endless issues. A partnership created in order to enhance automotive developments seems to come to an end, with bickering, frustration and bad press as the main “accomplishments” of the relationship.

According to the credit agency Moody’s, this dispute affects VW’s growth prospects in Asia and have a negative credit effect on Europe’s biggest carmaker. “This likely end of the cooperation agreement is credit negative for Volkswagen, which aimed to strengthen its position in Asia through its agreement with Suzuki, and in particular India,” said Moody’s Senior Vice President Falk Frey said in a report earlier this week.

When the partnership began back in 2009, the German carmaker paid $2.3 billion for a 19.9% stake in Suzuki. The intent was to develop hybrid and electric vehicles as well as to concentrate on expansion into emerging markets.

Actually, the Japanese automaker was targeting Volkswagen’s engine technology, while the German automaker was keen on Suzuki’s access to India that could boost its car sales. Suzuki, the 9th largest automobile manufacturer in the world by production volume, has a successful partnership with Maruti in India, where they are market leaders.

But since 2009 until present, the cooperation agreement between VW and Suzuki hasn’t resulted in a single project, the companies have said.

Moreover, Suzuki is accused of violating a cooperation agreement by purchasing engines from Fiat S.p.A. That allegation “significantly disparaged Suzuki’s honor,” chairman Osamu Suzuki said Sept. 22. He demanded a retraction.

The two automakers have been at odds since VW said in its March annual report that it could “significantly influence financial and operating policy decisions” at Suzuki, describing the Japanese company as an “associate.”

Two weeks ago, Suzuki served VW with a notice of breach of contract, demanding the German company give it access to key technologies within weeks. Unless it does so, Suzuki’s biggest shareholder must sell back its stake and quit the alliance, the Japanese carmaker said. Suzuki chairman and CEO Osamu Suzuki offered to buy the shares VW holds in return for selling its 1.5 percent stake in Volkswagen back to its German partner.

VW officials say that VW has no intention of selling the stake, and wants to continue with the alliance. According to German magazine Wirtschaftswoche. VW CEO Martin Winterkorn has stated that the company will seek a resolution for the conflict, even one that would dissolve the relationship, by the end of the year.