Abstract

In December 2009, Volkswagen AG (VW) of Germany purchased a 19.9% stake in the Japanese manufacturer Suzuki Motor Corporation (Suzuki). They both agreed to share their technologies and distribution network with each other. While VW agreed to provide its hybrid and electric technologies along with access to global markets to Suzuki, Suzuki agreed to provide VW with access to its small-displacement motors and Indian presence. However, both the auto manufacturers failed to reach an agreement on any of their proposed goals. Suzuki served notice of breach of contract to VW in October 2011 stating that VW had not given it access to the hybrid technology which it had promised. Similarly, VW accused Suzuki of violating the agreement by procuring diesel engines from Fiat. Further fuelled by the cultural differences and failed joint business proposals, the partners, on November 18, 2011, terminated the framework agreement and Suzuki demanded that VW return its 19.9% shareholding in the company. VW’s refusal to do so led to Suzuki filing for international arbitration. This case is meant for MBA students as a part of the International Management/ Strategic Management course.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the various issues and challenges in strategic alliances.
• Understand the various challenges and issues in trans-border/transcontinental alliances.
• Understand the global consolidation trends in the global automotive industry and the rationale for the alliance between Volkswagen and Suzuki.
• Examine the partnership and understand the reasons for the breakup, and discuss ways in which the situation could have been salvaged.
• Discuss the challenges that lie ahead for the companies and possible remedial actions.

Keywords

Growth strategy, Strategic alliance, Global business model, Technology sharing, Trans-border alliance, transcontinental alliance, Culture, cultural differences, Japanese Business Etiquette, German Business Etiquette, International arbitration, International management, Implementation, Trust, Key success factors, Global automotive industry, Indian automotive market, Volkswagen, Suzuki, Germany, Japan, India