COMMENT: VW-Suzuki politics undermined business case
The industrial logic behind the Volkswagen and Suzuki tie-up looked pretty good, on the face of it. Suzuki would get access to VW technology and VW would get a helping hand in India where Suzuki leads the car market. It would be a strategic partnership to build on, synergies to be exploited. Alas, those plans never materialised and instead the relationship between the two descended into something resembling a soap opera slanging match. It takes two to have an argument, but it is striking that efforts to patch it up have failed so abysmally. If the business case is that strong, surely they would have buried the hatchet and tried to make it work?
Maybe, but the politics seems to have overwhelmed the business side of things in this case, with neither party feeling that the costs of the tie-up's failure are all that large or serious.
The meaning of 'independence' and the precise nature of the agreement between the two has been contentious. Whether it was intentional or not, Suzuki has perceived VW's approach to the relationship as high-handed with the clear implication that Suzuki is the junior partner. Volkswagen is obviously the larger of the two companies and has been on a roll lately as it eyes becoming the world's biggest car firm. But when Volkswagen described Suzuki as an 'associate' in its annual report, that infuriated senior management at Suzuki. Fears of a takeover by stealth were ignited.
And that may have given added impetus to Suzuki seeking to emphasise its independence in doing the diesel engine deal with Fiat (Suzuki no stranger to doing selective collaborations with other OEMs). That, in turn, would have upset Volkswagen and further applied the brakes to technology sharing from Volkswagen to Suzuki. The scene was set for respective positions to become further entrenched, trust between the two parties rapidly dissipating.
It now looks like the pair will have to draw a line under the affair and agree to go their separate ways. Lessons learned? If you enter into a collaboration, make sure that both sides have expectations fully aligned from the start and be fully aware of any political sensitivities on the other side. Don't take things for granted, either. Good lines of communication are obviously vital to avoiding misunderstandings. If one company is in a desperate mess (like Nissan was when Renault saved it in the late 1990s) then the inter-company politics may in practice be more straightforward. Suzuki was never in such a weak position.
Indeed, a look at the Renault-Nissan alliance shows a deft touch by Ghosn and co that contrasts sharply with the VW-Suzuki discord over what independence and cooperation actually mean. The independence of Renault and Nissan in their clearly defined alliance has always been emphasised and Ghosn has been the consummate politician over the years.
The politics between VW and Suzuki must have got off on the wrong foot just after the two signed their strategic partnership in December 2009. At that time the pair said each had complementary strengths and would work together where there would be benefits from doing so while retaining the independence of each company.
"In terms of product [lines], global distribution and manufacturing capacities, Volkswagen and Suzuki ideally complement each other. The companies plan a joint approach to the growing worldwide demand for more environmentally friendly vehicles," they said in a statement back then.
"The management of Volkswagen and Suzuki have concluded that the complementary strengths of each company make for a perfect fit in exploiting their respective advantages as well as rising to the challenge of the global market."
That all sounds good, but then it all went horribly wrong...