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by Tim Beissmann

Volkswagen AG last night confirmed that it would buy a 19.9 percent stake in Suzuki Motor Corp., moving the German company closer to its goal of becoming the world’s largest automotive manufacturer.

The deal is worth 222.5 billion yen (AUD$2.8 billion) to Suzuki, which in turn plans to invest close to $1.3 billion into VW shares – securing a 2.5 voting stake – in a move that Suzuki’s 80-year-old CEO, Osamu Suzuki, said was progressive and necessary.

“The world automotive industry is in the midst of significant changes.  It is difficult to adapt to these numerous issues on our own.

“We must move with the times,” he said.

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But he strongly repudiated the notion that his company would become just another automaker controlled by VW.

“I don’t want you to misunderstand: Suzuki is not becoming a 12th brand for Volkswagen.

“I don’t want other folks telling me how to do things,” he said.

VW CEO, Martin Winterkorn, confirmed that the alliance would strengthen both manufacturers.

“Two of the world’s leading carmakers are joining forces and preparing to meet the growing challenges that lie ahead.

“Together we can maximise our opportunities for growth in emerging markets,” he said.

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The alliance’s push into the Asian market will be a significant one.

VW is currently the largest carmaker in China, which is the world’s biggest automotive industry, while Maruti Suzuki (of which Suzuki owns 54 percent) is India’s top carmaker.

In November, China’s new car sales were up an enormous 98 percent over 2008 with 1.04 million sales in total.

In the first 11 months of 2009, 9.23 million passenger cars have been sold there, with analysts expecting growth to continue in the new year.

Meanwhile in India November sales were up 61 percent to 133,000 with the market for the year expected to top 1.3 million new vehicles.

Winterkorn said the two companies had expertise in different areas and had a lot to learn from one another.

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“In partnership with Suzuki, the VW Group can take a big step forward in the compact car segment, particularly in the emerging markets in Asia.

“In turn, Suzuki can benefit from our experience with efficient and environmentally friendly drivetrain and vehicle technologies,” he said.

The alliance would also bring VW closer to taking the title of number one global automaker off Toyota, something it previously aimed to achieve by 2018.

In the first six months of 2009, Suzuki has sold 1.15 million vehicles and Volkswagen 3.265 million.

Combined that equals sales of 4.415 million, almost one million more than Toyota at 3.564 million.

Winterkorn confirmed that the top mantle was still a strong ambition of his and the company’s.

“If that succeeds faster, we’re happy.”

The deal is set to be completed by mid-February.