Volkwagen to return Suzuki shares, but Japanese carmaker not without fault

The alliance, first announced in 2009, was originally promised to focus on the joint development of “innovative and eco-friendly budget cars”, allowing both companies to expand their presence in emerging markets.

In 2011, however, Suzuki moved to dissolve the partnership after an engine deal with Fiat brought complaints from Volkswagen.

Suzuki, claiming that its purchase of diesel powertrains from Fiat did not go against the terms of its agreement with Volkswagen, returned fire by declaring that Volkswagen had not delivered on promises to share its technologies and engineering manpower.

Read: Suzuki documents detail how alliance with Volkswagen deteriorated

Above: Volkswagen was understood to have planned for European and Indian launches of a re-styled Suzuki hatch.

This week, the London Court of International Arbitration has ordered Volkswagen to sell its 19.9 per cent stake in Suzuki, purchased in 2009 for about $2.6 billion.

Details of the required sale have not been released, although it is understood that Suzuki is expecting the stake to be returned either at current market value, or sold to a buyer of its choosing. Volkswagen has reportedly confirmed the appointment of a bank to analyse the order and facilitate a sale.

“We welcome the clarity created by this ruling. The tribunal rejected Suzuki’s claims of breach and found that Volkswagen met its contractual obligations under the cooperation agreement,” Volkswagen said in a statement today.

“Nevertheless, the arbitrators found that termination of the cooperation agreement by Suzuki on reasonable notice was valid, and that Volkswagen must dispose of the shares purchased. This decision is based on the principle that a contract may be terminated upon reasonable notice.”

Although a positive result for Suzuki, this week’s result is not an outright win, with the Japanese carmaker found to have breached its agreement with Volkswagen.

The decision could see Suzuki pay damages to Volkswagen, although the details of that situation are expected to be hammered out in future arbitrations.

Volkswagen said that it expects a “positive effect” on earnings and liquidity from the sale of its Suzuki shares.