TOKYO/BERLIN -- A tiff that started over Volkswagen AG's description of Suzuki Motor Corp. in its annual report has escalated into an argument threatening to unravel the two automakers' planned alliance before the partnership ever gets going.
"Volkswagen is not talking to us," Osamu Suzuki, the company's chairman, said in an interview. "We have no plans to talk to them."
The breakdown in relations began in March when VW said in the report that it could "significantly influence financial and operating policy decisions" at Suzuki, describing the Japanese company as an "associate."
That didn't sit well with Suzuki. The two since then have engaged in a public feud that has brought to a halt VW's efforts to turn a 222.5 billion-yen ($2.9 billion) investment into an operational alliance. The partnership was meant to combine Suzuki's leading position in India, Asia's second-fastest growing major economy, with Volkswagen's global reach as the world's third-biggest carmaker.
When the deal was signed in December 2009, with VW taking a 20 percent Suzuki stake, the companies said they intended to cooperate on technology, including hybrids and electric cars, and expansion in emerging markets. Almost two years later, no joint projects have begun.
VW, which forecasts deliveries will rise 5 percent this year after selling 7.2 million vehicles in 2010, aims to overtake Toyota Motor Corp. and General Motors Co. as the world's largest carmaker by 2018 and is targeting India as an expanding market to boost sales. Suzuki, which sold 2.64 million cars in its last fiscal year, delivered 1.13 million of those vehicles in India. VW sold 53,300 cars in the country in 2010.
"Suzuki really needs a big manufacturer behind it, so the effect of a withdrawal would be far worse for them," said Aleksej Wunrau, a Frankfurt-based BHF Bank AG analyst. "Volkswagen could very well step back from Suzuki and either seek another partner or start afresh on their own in Japan and India, which would of course be a lot more expensive."
VW shares have gained 64 percent since the partnership was announced on Dec. 9, 2009, valuing the Germany-based carmaker at 46.1 billion euros ($65 billion). Suzuki has dropped 33 percent, giving Japanese company a market capitalization of 860 billion yen ($11.2 billion).
Osamu Suzuki hasn't found any VW technologies he'd like to adopt following an extensive review of what they have to offer, he wrote in a Nikkei newspaper column in July. Instead, he decided in June to buy diesel engines from Italy's Fiat S.p.A. for cars built in Hungary. Suzuki in July also said the automaker was open to forming alliances with others.