Fiat could step in if VW, Suzuki part ways

Murali Gopalan Mumbai | Updated on November 12, 2017 Published on September 08, 2011

Tie-up will give Fiat a new small-car platform for Europe, Asia-Pacific

The Volkswagen, Suzuki rift continues to make news so often that auto industry officials are convinced that it is only a matter of time before the two formally announce their divorce. It was in December 2009 when VW took nearly 20 per cent in Suzuki while the latter settled for 2.5 per cent as part of a cross-holding deal.

The split, when it happens, will have its own share of implications in India where VW was hoping to leverage the alliance through synergies at the back-end. Maruti Suzuki, in turn, was expected to benefit from access to VW's diesel engines, which would have gradually reduced its dependence on Fiat.

A breakup with VW will make no difference to Maruti's fortunes here, considering that the alliance has yielded nothing for nearly two years now. Further, the company's added requirement of diesel engines will be met by Fiat from its Ranjangaon plant.

This has only fuelled speculation that Suzuki and Fiat could look at strengthening ties in the near future. Whether this will result in a cross-holding equity alliance on the lines of VW-Suzuki remains to be seen though observers say it is a strong possibility.

On the face of it, both companies have their core strengths in small cars. Fiat is in much better shape today globally and the successful integration of Chrysler into its fold has been one of the most encouraging developments.

A marriage with Suzuki will not only give it a customer for its diesel engines but also create the possibility of a new small car platform for Europe and the Asia-Pacific region.

From Suzuki's point of view, it makes sense to have a partner in these challenging times. It had a decades-long partnership with General Motors, which was expected to play a bigger role in Maruti. But all this changed when GM acquired Daewoo and Suzuki decided to be on its own.

Alliances have become the name of the game within the global automobile industry to keep costs in check in an intensely competitive scenario. Companies like Daimler could not quite pull it off with Chrysler, Mitsubishi and Hyundai in the recent past but this did not stop the company from tying up with Renault.

Mitsubishi, likewise, has joined hands with Peugeot and reports have been doing the rounds that the two could end up working on a global car in India eventually. Renault's cross-holding deal with Nissan has been the most successful alliance for years now.

VW may not have quite got it right with Suzuki but has a host of other brands in its kitty which include Skoda, Audi, MAN, Scania and, more recently, Porsche. It is also working aggressively on its mini-car plans and the Up! is a big step in this direction.

Published on September 08, 2011
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