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Suzuki-VW tie-up ushers in new era
The combined global sales of Suzuki Motor Corp. and Germany's Volkswagen AG eclipse that of Toyota Motor Corp.
The forging of the world's largest automobile alliance will significantly change the landscape of the auto industry's power map.
Suzuki, a maker of compact cars, and Germany's largest automaker agreed Wednesday to form capital and business tie-ups.
Volkswagen will become Suzuki's largest shareholder by acquiring 19.9 percent of Suzuki's outstanding shares. Suzuki, in return, will purchase up to 2.5 percent of Volkswagen's shares.
The two companies will cooperate in such areas as the development of electric vehicles and fuel-efficient engines, as well as work in tandem on sales in newly emerging nations.
The Suzuki brand has a reputation for its minicars. However, its Swift and other compact car models also contribute to its annual global sales of 2.3 million units. Volkswagen, the world's third-largest automaker, also is strong in the compact car sector, thanks to its Golf and Polo models. The two companies had been competitors for many years.
Not any more. The automakers have teamed up because each has strength in different areas of the compact car sector.
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Give-and-take
Suzuki has excelled at producing low-priced automobiles targeted at newly emerging markets as it made the best use of low-cost production technologies it developed in its production of minicars. Volkswagen, on the other hand, has established a reputation for its environmentally friendly technologies used in low-emission engines.
The tie-up is aimed at allowing the automakers to complement each other through the fusion of two "eco" elements--Suzuki's "economy"-conscious technologies and Volkswagen's "ecology"-conscious technologies.
Suzuki stands atop the rankings for sales in India, while Volkswagen rules the roost for sales in China. The two companies will be able to take advantage of each other's sales networks in these key markets.
Suzuki had been eager to find a new partner after it ended its nearly 30-year ties with General Motors Co. of the United States.
Suzuki's signing of a new alliance with Volkswagen can be largely attributed to the Japanese automaker's entry into newly emerging markets before many rivals, which enabled it to build solid footholds there.
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Industry at turning point
The auto industry is at a historic turning point. Automakers must consider shying away from vehicles that run on gasoline as they suffer from sluggish sales in the wake of last year's Lehman shock--the financial meltdown triggered by the collapse of U.S. investment bank Lehman Brothers Holdings Inc.
The development of green technologies and expanding sales routes in emerging economies likely will be critical to automakers' survival.
But achieving these goals will not come cheaply. It would be very difficult for one company to shoulder these huge costs alone.
The Big Three U.S. automakers, which had been the leading players in the industry, no longer have the wherewithal to make such investments. Japanese and European companies therefore will need to review their strategies on courting potential allies.
Mitsubishi Motors Corp., which had an alliance with Chrysler Group LLC of the United States, is now in talks with French carmaker PSA Peugeot Citroen. Peugeot reportedly is keen to tap MMC's pioneering work in the commercial production of electric vehicles and strength in the Russian market.
"Economy" and "ecology" look set to be critical elements in any auto industry tie-ups in the years ahead. A new era has dawned on the realignment of the auto industry.