Volkswagen Ordered to Sell Its Stake in Suzuki

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The big news this week might be about how Volkswagen falsified emissions reports on its diesel-powered automobiles – a move that today lead to Volkswagen CEO Martin Winterkorn stepping down from his position in the company, and VW stock dropping nearly 30%, at the time of this writing.

Less well-known though is that Volkswagen has also lost its long-fought battle with Suzuki over the Japanese company’s stock ownership. VW and Suzuki were supposed to untie the knot back in 2011, but Volkswagen did not go quietly into that good night.

Taking the case to arbitration, the London Court of International Arbitration has finally handed the two parties its verdict. As such, Volkswagen will have to sell its 19.9% stake back to Suzuki.

The deal was originally intended to help give VW access to Suzuki’s presence in developing markets, as well as some small-displacement engine technology.

However, quickly into their relationship, Suzuki wanted out of its partnership with Volkswagen, and has been trying to divest VW of its position ever since.

At the heart of that issue is a number of factors, all of which boil down to the extreme differences in the corporate and national cultures of the Japanese and German firms.

In the two-wheeled world, those following the money could make a strong argument for this situation leading to Suzuki’s departure from MotoGP and WSBK, amongst other racing series, as well as for its stagnant product lineup.

The arbitration ruling allows Suzuki to buy its stock back from VW, which should help the German company’s bottomline by roughly $3.8 billion (VW purchased the stock position for roughly $1.9 billion).

The arbitration court also ruled that Suzuki violated its partnership agreement with VW, which will likely lead to other financial penalties for the Japanese manufacturer, though the cost of those penalties are likely to be the subject of further arbitrations.

There is also the small matter of the 1.5% stake that Suzuki holds in Volkswagen…as you can tell, this story is far from over.

Source: Wall Street Journal