Japan's Suzuki Motor said on Wednesday it will sell a 19.9 percent stake to Volkswagen for $2.5 billion and use half the proceeds to buy shares in the German automaker, as the two firms form a formidable force in the auto industry.
Shares in Suzuki bucked a sharp fall in other Japanese auto stocks to end up 3.5 percent at 2,370 yen on Wednesday in Tokyo, a day after sources told Reuters of Volkswagen's impending stake purchase.
"Two of the world's leading carmakers are joining forces and preparing to meet the growing challenges that lie ahead," Volkswagen CEO Martin Winterkorn said in a statement. "Together we can maximize our opportunities for growth."
Winterkorn and Suzuki Chief Executive Osamu Suzuki will hold a news conference at 5 p.m. in Tokyo.
Suzuki will allocate 19.9 percent of itself to Volkswagen from its treasury stock.
Executives at Volkswagen, the world's third-largest automaker, have publicly said over the past half year that Suzuki would be an interesting target given its expertise in small cars -- a key segment to compete in emerging markets.
"Financially speaking, it's helpful for Suzuki to have a partner to invest in future technologies," said Chizuko Satsukawa, an autos analyst at Standard & Poor's.
News of the Volkswagen-Suzuki alliance comes days after PSA Peugeot Citroen and Mitsubishi Motors Corp said they were exploring deepening their ties, which have been limited to a project-based partnership so far.
Reports that the French carmaker could take a controlling stake in ailing Mitsubishi Motors have triggered the inevitable question of "who's next," as the industry faces fragile demand, chronic overcapacity and mounting pressure to join hands to tackle stricter environmental regulations.
Suzuki lost its equity ties to General Motors Co a year ago, having bought back the U.S. automaker's 20 percent stake in it, now worth about 257 billion yen ($2.9 billion).
Full story
