The TVS-Suzuki Break-Up
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Case Details:
Case Code : BSTR028
Case Length : 11 Pages
Period : 1992-2002
Organization : TVS Suzuki
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Auto and Ancillaries
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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"A joint venture is a special purpose vehicle set up by two entities for the purpose of learning. It will work as long as both want to learn different things. Once this is achieved by either or both partners, it is time for disengagement."
- Venu Srinivasan, Managing Director, TVS, in October 2001.
The Breakup
In September 2001, Sundaram Clayton (of the TVS group of companies) and Japanese automobile major Suzuki Motor Corporation (SMC), partners in the joint venture TVS Suzuki (TVS Suzuki), India's second largest motorcycle company, announced their decision to break-up.
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TVS bought the 25.97% stake of Suzuki for Rs 90 million, increasing its stake to 58.43%.1
Suzuki signed an agreement with TVS, according to which the existing licensing arrangement was to continue for 30 months. TVS agreed to pay royalty to Suzuki for this period. The break up did not come as a surprise to industry observers, as rumors about the straining relations between TVS and Suzuki had surfaced in the early 1990s itself.
Though both TVS and Suzuki refused to comment, their differences over the issues of management control and ownership had become well-known.
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Suzuki's departure evoked mixed reactions from industry watchers about the future of TVS Suzuki.
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Analysts commented that TVS' in-house product development was not good. Moreover, it had a string of failures between 1994 and 2001 such as the Shogun, Shoalin, Supra and Supra SS.
With competition being extremely fierce in the Indian motorcycle market, the fact that TVS did not have any successful four-stroke models besides the Fiero did not augur too well. Analysts claimed that the breakup had severely eroded the brand equity of TVS Suzuki's products.
Leading two-wheeler manufacturer Kinetic's Joint Managing Director, Sulajja Firodia Motwani said, "The new TVS will be weaker both in motorbikes and scooters." |
The TVS-Suzuki Break-Up
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