The Auto Writer

Word that Volkswagen is considering taking a 20% stake in Suzuki is welcome news for the beleaguered Japanese automaker, a company that has found it difficult to compete against larger, cash rich competitors. (Reuters: Exclusive: Volkswagen to take up to 20 percent Suzuki stake)

Indeed, through November 2009, American Suzuki reports sales are down by 54.7% over last year, the worst showing of any car manufacturer in the states. That translates to just 36,810 units sold, a number comparable to what General Motors sells in one week.

Tiny Cars

Suzuki’s specialty is building mini and compact cars although the automaker is about to release the mid-size Kizashi sedan, the largest car sold by Suzuki in the US. Volkswagen builds a number of small models including the New Beetle and Golf, but they don’t have a toehold in the fast growing kei or city car segment which is currently dominated by Toyota, Suzuki, and Daihatsu.

Kei cars are popular in Japan and elsewhere in Asia including India a market coveted by Volkswagen. Indeed, Maruti Suzuki is an Indian venture that builds approximately half of all cars in the India, a steadily maturing market expected to grow rapidly over the next decade. By having a stake in Suzuki, VW can expand its presence in India quickly.

CAMI Ends

Suzuki has had a relationship with a large automaker before. Up until 2006, General Motors (GM) had a 50% stake in the company, but ended up selling that back to Suzuki. Recently, GM and Suzuki decided to end their 50-50 manufacturing relationship in Canada – Canadian Automotive Manufacturing Inc. or CAMI – with GM buying out Suzuki’s part of the business.

That move effectively ended GM’s relationship with Suzuki, paving the way for the Japanese automaker to hook up with Volkswagen.

Global Consolidation

Should Volkswagen end up acquiring a piece of Suzuki before the year is out, they’ll be just one of many new alliances forged over the past several years by automakers the world over.

Peugeot and Mitsubishi are in talks as mentioned here on Tuesday. Tata Motors now owns Land Rover and Jaguar; Toyota holds Daihatsu and has a stake in Subaru; Chrysler is controlled by Fiat, and Renault and Nissan have been joined at the hip since 1999. Volkswagen is gradually acquiring Porsche, having recently upped its stake in the brand to 49.9%.

Not every alliance works with one of the worst arrangements in modern times being the relationship between Daimler and Chrysler. Still, in these days of overcapacity and consolidation, some sort of hook up would be beneficial to most manufacturers.

Photo Credit: American Suzuki