VW-Suzuki divorce raises doubts over auto alliances

Suzuki's decision to seek a divorce from German partner VW adds to a growing list of failed alliances in the car industry and throws up more doubts on whether such deals can ever deliver scale and lower development costs.
"Transcontinental partnerships are extremely difficult," Thomas Sedran, managing director at consultancy AlixPartners, said.
"You have to give these projects more time to deliver results. A project that takes 30 months to finish here in the German or central European region may take 40 months elsewhere."
The most spectacular flop was Germany's Daimler four years ago when it unwound one of the least successful deals in the history of the auto industry, dumping Chrysler and swallowing a $30 billion loss. PSA Peugeot Citroen and Mitsubishi Motors, which work together on projects including electric cars, tried to engineer an equity swap to cement their partnership but abandoned talks last year.
Even within Europe, a number of tie-ups have failed. A major cross-holding involving France's Renault and Sweden's Volvo broke up in 1994 after a revolt by Volvo shareholders.
More recently, BMW sold off Rover after six years of ownership ended in heavy losses at the British carmaker. Under intense pressure to shave costs, automakers just outside the top global ranks have sought to develop or expand alliances that give them access to car segments not yet in their portfolio or to new markets.
For smaller players such as Suzuki Motor, developing technologies such as a complex hybrid system on its own was not an option, which is why it aligned itself with VW in 2009.
But Suzuki said it wanted to end its two-year alliance after the German carmaker accused it of violating the pact by agreeing a diesel engine supply deal with Italy's Fiat. The break-up followed two months of squabbling between the two companies, in which Suzuki accused VW of wanting to bring the Japanese company under its control. VW tried to make amends by promising it would not encroach on Suzuki's independence. The split highlights the difficulties for carmakers in general of keeping up good relations but also leaves VW the odd one out less than a week after it had to push back a planned merger with Porsche beyond the end of the year.
"VW is fighting in isolation," Ferdinand Dudenhoeffer, head of the Centre for Automotive Research at the German University of Duisburg-Essen, said on September 14.