Business & Finance

VW breached pact by hiding technology

Published Updated

Unless it does so, Suzuki's biggest shareholder must sell back its stake and quit the alliance, it said.

The latest exchange in accusations deepens a feud between the two carmakers. VW last month accused the Japanese firm of breaching their agreement by procuring diesel engines from Fiat and is demanding it end that cooperation.

"The whole point of the partnership was to gain access to key technologies, such as those for hybrids and environment technologies," Executive Vice President Yasuhito Harayama said at a news conference in Tokyo.

"If VW can't honour that, it must return Suzuki's shares immediately."

Suzuki, which has said it has yet to hear a proper response from VW about a proposal to end their partnership, is demanding action within weeks, Harayama said, adding that Suzuki may consider other steps if VW ignores the notice.

VW bought a 19.9 percent interest in Suzuki for about 1.7 billion euros ($2.3 billion) in January 2009.

Billed as a partnership of equals, the tie-up was meant to bolster VW's presence in India for small cars and give Suzuki access to technology it could not afford to develop on its own but the partnership has so far failed to deliver any meaningful cooperation.

"If this situation is not resolved quickly, it does not mean that Suzuki is in trouble, but it is in neither companies' interest for this uncertainty to drag on for too long," said Harayama.

Suzuki's deal with VW is not the first time it has tied itself to one of the big global automakers.

In 1998, Suzuki joined a strategic partnership with General Motors , which took a 17.4 percent stake in the Japanese firm. That unravelled in 2006 when the US car company sold most of its stake as it scrambled for cash amid ballooning losses.

Copyright Reuters, 2011