In the year 2009, Volkswagen signed a partnership agreement with the Japanese manufacturer Suzuki. The company purchased 19.9% shares which will soon be sold, to comply with an international arbitrator’s order.
Manufacturers signing a contract to expand their horizons and step into new territories happen from time to time. But, the problem arises when they don’t share the same corporate culture and business objectives. A couple of years ago, Suzuki agreed to the terms and has managed to create a firm platform for themselves in London.
The alliance they formed ended as early as 2012, but an amicable settlement has been confirmed after a three year break. While some financial damages are inevitable, the companies clarified that they will not be creating further proceedings with the current arbitration. Instead, they are planning to address those issues in future arbitrations. According to the international arbitrator, Volkswagen should sell their 19.9% stake that they hold in Suzuki’s shares.
Volkswagen representatives expressed great satisfaction over the arbitration results. “We are glad to announce that the arbitration has brought much clarity to the company and its shares”, said the company in a statement. They added that their profits are expected to receive a significant boost in the coming months and selling stakes will allow more liquidity which is good news for shareholders.
In another statement, Suzuki confirmed that the company has achieved their objectives through this arbitration and are happy with the final call made by the arbitrator. When Volkswagen purchased the 19.9% shares, it was sold by Suzuki for a price of 1.7 billion euros. The final price for the shares based on the current market condition is yet to be finalized. However, the court has ordered that VW should sell them for a pricing that is considered reasonable by Suzuki.
The association came into being because Volkswagen wanted to access new consumer markets, including India where Suzuki had a stronghold. Besides, the company also specialized in creating small, fuel efficient cars. Suzuki on the other hand was fascinated by VW’s fuel efficient technology and other features which they wanted to integrate into their own vehicles.
In the recent past, both companies have overcome the initial hurdles they had and are now capable of standing on their own, which led to the arbitration. From their statements, it is evident that both Suzuki and Volkswagen are extremely happy with the outcome as they can now focus on expanding their businesses the way they want to.