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Old 7th July 2011, 22:58   #1
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Default Suzuki not interested in collaborating with VW in India. EDIT : Looking for a way out

Osamo Suzuki Blog Bombs Volkswagen | The Truth About Cars

Some quotes:
Does Suzuki face an immediate difficulty? The answer is “Not at all.” We learnt about Volkswagen’s technologies, but we did not find any one of them interesting enough to adopt immediately. Suzuki is working on its own green technologies. Our engineers are gaining more capabilities than I expected, and are developing surprisingly good technologies. For example, our new minicar engine that was developed for the first time after 16 years enjoys class-leading fuel efficiency in Japan. We are producing more than 200,000 units of our diesel engine, which is attracting a lot of attention, in India. Thus for the time being, particularly in critical markets like the minicar market and India, we are not in a hurry to collaborate with Volkswagen.

If we are short of any technology, we have an option to ask other companies with which we benefit from technological exchanges. Supply of diesel engine from Fiat that was announced the other day is one example.
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Old 8th July 2011, 08:59   #2
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Default Re: Suzuki not interested in collaborating with VW in India

Kill me, but phew, at last Suzuki has done well by not looking for VW expertise in India and the kei car market, then the tag of easy to maintain Marutis would have gone.
but it beats me which 2,00,000 units of diesel engine Osamo-san is talking about. Te Fiat diesel? How can he then tell "our diesel engine"?
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Old 8th July 2011, 11:56   #3
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Default Re: Suzuki not interested in collaborating with VW in India

Pretty sane move by Suzuki given that VW has proven to be much more serious about garnering market share than Fiat , its existing collaborator. As of now VW has much more to gain from any collaboration in India than Suzuki - some of the major benefits to VW that I can see are immediate economies of scale , service network tie-up (if thats part of the collaboration deal). Thus a collaboration would be opening the doors to a supremely aggressive competitor like VW by Suzuki. IMO Suzuki has its own niche in the mass market segment and is doing very well to protect its turf - throwing in a collaboration with VW in the ring would do more harm to the company than good.
By the 200000 units I think he means the MJD diesel engines being manufactured by the Manesar unit .. Suzuki has made Fiat's tech its own
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Old 8th July 2011, 14:12   #4
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Default Re: Suzuki not interested in collaborating with VW in India

Note from Mod : You have way too many spelling & grammatical errors in your posts. This negatively affects the forum experience for other members / guests.

You are hereby instructed to proof-read your posts prior to hitting the "submit" button. Thanks

Last edited by GTO : 9th July 2011 at 16:59.
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Old 8th July 2011, 14:36   #5
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Default Re: Suzuki not interested in collaborating with VW in India

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Originally Posted by DicKy View Post
but it beats me which 2,00,000 units of diesel engine Osamo-san is talking about. Te Fiat diesel? How can he then tell "our diesel engine"?
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Originally Posted by souravc View Post
By the 200000 units I think he means the MJD diesel engines being manufactured by the Manesar unit .. Suzuki has made Fiat's tech its own
Suzuki owns the licenses for manufacturing the 1.3 MJD (75Bhp) and this was obtained during the days when GM had a share in Suzuki. So technically it can be called as their own engine since they are not paying any royalty for manufacturing this particular MJD variant.
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Old 8th July 2011, 14:48   #6
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Default Re: Suzuki not interested in collaborating with VW in India

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So technically it can be called as their own engine since they are not paying any royalty for manufacturing this particular MJD variant.
I doubt this is true! As far as I know, Suzuki has to pay certain amount to Fiat for each of this engine made. Also there is a cap on the maximum number of engines that could be manufactured a year or so [2.5L ?]. Again all these info I have read in this very forum from different threads and don't have any other source of info.
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Old 8th July 2011, 15:42   #7
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Default Re: Suzuki not interested in collaborating with VW in India

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I doubt this is true! As far as I know, Suzuki has to pay certain amount to Fiat for each of this engine made. Also there is a cap on the maximum number of engines that could be manufactured a year or so [2.5L ?].
MJD engines were developed by the Poland based Fiat-GM Powertrain, a joint venture between GM and Fiat. This occurred during the time period when GM used to own a stake in Fiat. Suzuki (GM had a 20% stake in it) also invested some money in the engine development. In return for this investment Suzuki was granted full license to build and market the 1.3 litre (75Bhp) version of the MJD in its small cars.

Later on GM bought itself out of Fiat and also sold majority of their stakes in Suzuki. Suzuki now an outsider, failed to reach an agreement with either Fiat or GM for further tech transfer for the manufacture of bigger MJD engines and this is the reason why Maruti never had any MJD engine larger than 1.3L (75Bhp) for a long time.

MSIL does pay royalty to Fiat for manufacturing the VGT version of the 1.3 MJD.

Last edited by harishnair : 8th July 2011 at 15:45.
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Old 8th July 2011, 16:10   #8
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Default Re: Suzuki not interested in collaborating with VW in India

The VW-Suzuki alliance at first sounded interesting to me. But now, Suzuki's decision to work independently is welcome indeed. Suzuki has done well in India and don't need VW as much as VW need Suzuki. VW through this alliance was probably trying to tap into Suzuki's wider service network in India which is its weak link as of now.

MUL have done a better job than Fiat themselves at tuning the 1.3 MJD engine.

Last edited by fuel_addict : 8th July 2011 at 16:11.
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Old 9th July 2011, 17:30   #9
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Default Re: Suzuki not interested in collaborating with VW in India

That's a rather loose statement from Suzuki. For one, Suzuki is a very small manufacturer on the global scale. Two, because of their small size, their R&D exercise is extremely limited. Neither does Suzuki have a single diesel engine to their credit, nor are they heavily investing, as the others are, in hybrid / future technologies. Except for building small, cheap cars, Suzuki doesn't do too many things well. Fact is, if it weren't for the Indian operations, Suzuki would have long been acquired by a larger manufacturer.

If Suzuki didn't find any "interesting" technology in VW, it's probably because they weren't looking. Else, stuff like DSG, turbo-diesels, direct injection petrols and more would be hard to miss, wot?
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Old 9th July 2011, 20:08   #10
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Default Re: Suzuki not interested in collaborating with VW in India

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That's a rather loose statement from Suzuki. For one, Suzuki is a very small manufacturer on the global scale. Two, because of their small size, their R&D exercise is extremely limited. Neither does Suzuki have a single diesel engine to their credit, nor are they heavily investing, as the others are, in hybrid / future technologies. Except for building small, cheap cars, Suzuki doesn't do too many things well. Fact is, if it weren't for the Indian operations, Suzuki would have long been acquired by a larger manufacturer.

If Suzuki didn't find any "interesting" technology in VW, it's probably because they weren't looking. Else, stuff like DSG, turbo-diesels, direct injection petrols and more would be hard to miss, wot?

I think Mr. Suzuki will agree with all the facts you have mentioned (I believe he said as much in hi blog post) but then he also says he can go ahead and buy the technology from anybody. And while VW does have many great technologies, they may not interest Suzuki due to their market requirements - I mean tiny cars may not be able to carry the expense and weight of DSG for example.

Anyway, his blog was more likely a response to VW's antics, he probably knew half of what he was writing was non sense.
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Old 9th July 2011, 22:00   #11
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Default Re: Suzuki not interested in collaborating with VW in India

Quote:
Originally Posted by harishnair View Post
MJD engines were developed by the Poland based Fiat-GM Powertrain, a joint venture between GM and Fiat. This occurred during the time period when GM used to own a stake in Fiat. Suzuki (GM had a 20% stake in it) also invested some money in the engine development. In return for this investment Suzuki was granted full license to build and market the 1.3 litre (75Bhp) version of the MJD in its small cars.

Later on GM bought itself out of Fiat and also sold majority of their stakes in Suzuki. Suzuki now an outsider, failed to reach an agreement with either Fiat or GM for further tech transfer for the manufacture of bigger MJD engines and this is the reason why Maruti never had any MJD engine larger than 1.3L (75Bhp) for a long time.

MSIL does pay royalty to Fiat for manufacturing the VGT version of the 1.3 MJD.
Suzuki got the 1.3 JTD Licence when FGP (Fiat GM Powertrain) was still intact in 2004. So they would have started paying royalty then and i don't think it would have stopped after the Fiat-GM settlement. After the Fiat - GM settlement in 2005, Suzuki was not affected as the ownership of the the Poland plant and this engine were split 50 - 50.

Fiat then started looking for partners to share developing costs for new vehicles. The result of this partnership was the Sedici / SX4 which uses the 2 Litre MJD.

Suzuki can manufacture only 2.5L engines a year in India as per the contract. Recently they approached Fiat for permission to increase capacity and Fiat is supposed to have said they will supply engines from the under utilised Ranjangaon plant.

The 1.3 FGT and VGT are the same engine and only the turbocharger is different. If Maruti actually have rights to the engine they should be able to make modifications as well, like what GM have done (removed a cylinder) for the Beat D

I am attaching an PDF (Year 2005). This shows Suzuki India as "Contract assembly" under Fiat.
Attached Files
File Type: pdf Auto Partnerships.PDF.pdf (2.34 MB, 1793 views)

Last edited by fiat_tarun : 9th July 2011 at 22:20.
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Old 9th July 2011, 22:58   #12
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Default Re: Suzuki not interested in collaborating with VW in India

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That's a rather loose statement from Suzuki. For one, Suzuki is a very small manufacturer on the global scale. Two, because of their small size, their R&D exercise is extremely limited. Neither does Suzuki have a single diesel engine to their credit, nor are they heavily investing, as the others are, in hybrid / future technologies. Except for building small, cheap cars, Suzuki doesn't do too many things well. Fact is, if it weren't for the Indian operations, Suzuki would have long been acquired by a larger manufacturer.

If Suzuki didn't find any "interesting" technology in VW, it's probably because they weren't looking. Else, stuff like DSG, turbo-diesels, direct injection petrols and more would be hard to miss, wot?
I think the blog reflects the failure of VW in understanding the Japanese psyche - the reason that Suzuki is small by global standards is because they have chosen their niche , bikes and minis ( not even small cars ) and they are comfortable doing it. They do not aspire to look beyond that and given the fuel efficient cars that they make , i don't think they would fare too bad. On the issue of whether they could be acquired , its nearly impossible to do a hostile takeover in Japan .
Interestingly the blog refers to VW's small car moves , seems like that has rattled Osamu so no wonder he does not find any technology "interesting" . VW has cracked the China market big time and are making swift and sure moves in India , Suzuki is rightly worried . Hyundai is one wave that was endured by Suzuki and it brought down its market share by more than 20%. VW is potentially a bigger wave with more money power and with products like polo , vento ( with the reported 1.4 ltr in pipe) as also the Skoda lineup its going to hit the Swifts , SX4 sales .
I am curious to know whether VW asked for access to Suzuki service network ( there was a rumour about this) in India in return for giving Suzuki access to technology . One of the blogs reasons that the impatience of VW is due to the reason "Volkswagen wants to capitalize on Suzuki’s overwhelming market share in India. VW is nobody in India, while Suzuki owns half the market. One reason for this is Suzuki’s huge presence in India" and the partnership is not yielding fast enough .
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Old 9th July 2011, 23:40   #13
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Default Re: Suzuki not interested in collaborating with VW in India

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Suzuki has done well in India and don't need VW as much as VW need Suzuki.
MUL have done a better job than Fiat themselves at tuning the 1.3 MJD engine.
+1 from me. Undermining the R&D capabilities of Suzuki is not correct. If the 1.3 MJD was the reason for their major success, why fiat could not capitalize on it with much better cars overall & wide service network of TATA, Suzuki knows the Indian market at the back of its palm and like no other manufacturer, Hyundai comes very close but still a distinct second.

For VW to even reach to the third spot in our market will take years without the alliance of Suzuki, on the other hand Suzuki is not gone nuts to collaborate with VW and risk the entire market like India, if Suzuki lets VW access its core strength of service network, its like giving VW free advertising to Suzuki's loyal customers.
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Old 9th July 2011, 23:51   #14
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Default Re: Suzuki not interested in collaborating with VW in India

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Originally Posted by souravc View Post
I think the blog reflects the failure of VW in understanding the Japanese psyche - the reason that Suzuki is small by global standards is because they have chosen their niche , bikes and minis ( not even small cars ) and they are comfortable doing it. They do not aspire to look beyond that and given the fuel efficient cars that they make , i don't think they would fare too bad. On the issue of whether they could be acquired , its nearly impossible to do a hostile takeover in Japan .
Interestingly the blog refers to VW's small car moves , seems like that has rattled Osamu so no wonder he does not find any technology "interesting" . VW has cracked the China market big time and are making swift and sure moves in India , Suzuki is rightly worried . Hyundai is one wave that was endured by Suzuki and it brought down its market share by more than 20%. VW is potentially a bigger wave with more money power and with products like polo , vento ( with the reported 1.4 ltr in pipe) as also the Skoda lineup its going to hit the Swifts , SX4 sales .
I am curious to know whether VW asked for access to Suzuki service network ( there was a rumour about this) in India in return for giving Suzuki access to technology . One of the blogs reasons that the impatience of VW is due to the reason "Volkswagen wants to capitalize on Suzuki’s overwhelming market share in India. VW is nobody in India, while Suzuki owns half the market. One reason for this is Suzuki’s huge presence in India" and the partnership is not yielding fast enough .

I think apart from what you have written it also reflects Suzuki's annoyance in being treated as a junior partner.

Japan is a place of hierarchies and sensitivity to social position and any press leaks would be considered disrespectful in the country - believe it or not it matters a lot in Japan.


Also whether VW has the technology or not is moot - as Mr. Suzuki pointed out such technologies can not only be purchased, but also developed in house should a need arise. The biggest hurdle in developing a new technology is always in doing it the first time, once someone else has done it a lot of unknowns become approximate knowns (for example DSG is easy to understand, but as the manager of an Auto R&D department I might not put any resources on it because I don't know whether it will be feasible within a price range, and just to answer that question I need to spend a lot of money - classic chicken and egg. Now VW is selling cars so I can find out the price and reverse engineer the gearbox very cheaply - suddenly my decision making risk is 0).

What is relevant is who has the market. US and Europe are both saturated and China is close to saturation now - demography and income distributions play a major role, almost everyone who could afford a car already has one or will have one pretty soon; also the Chinese govt. is now making policies to actively car ownership. India is the next frontier and here Suzuki owns the market - and this is something you can not do overnight.
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Old 10th July 2011, 00:38   #15
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Default Re: Suzuki not interested in collaborating with VW in India

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I doubt this is true! As far as I know, Suzuki has to pay certain amount to Fiat for each of this engine made. Also there is a cap on the maximum number of engines that could be manufactured a year or so [2.5L ?]. Again all these info I have read in this very forum from different threads and don't have any other source of info.
GM is using the Duramax range of diesel engines under its own brand. But actually, that engine was developed by Isuzu when GM was having Isuzu. Right now, Toyota has Isuzu, but GM still potrays Duramax diesel engine range as its own.


Quote:
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That's a rather loose statement from Suzuki. For one, Suzuki is a very small manufacturer on the global scale. Two, because of their small size, their R&D exercise is extremely limited. Neither does Suzuki have a single diesel engine to their credit, nor are they heavily investing, as the others are, in hybrid / future technologies. Except for building small, cheap cars, Suzuki doesn't do too many things well. Fact is, if it weren't for the Indian operations, Suzuki would have long been acquired by a larger manufacturer.

If Suzuki didn't find any "interesting" technology in VW, it's probably because they weren't looking. Else, stuff like DSG, turbo-diesels, direct injection petrols and more would be hard to miss, wot?
If I am not wrong, Suzuki is 9th largest car maker in the world by volumes. We just cant call is that small. That the major part comes from India, Japan and rest of Asian countries is another thing.
Where Suzuki loses out is in margins I suppose ( as they are more of cheap small car manufacturer ).

I still agree with you that it actually makes sense that Suzuki gets absorbed by another larger manufacturer. After 2007/08 when Suzuki sales were at peak in USA ( the sales crossed 1 lakh units ), they are suffering. Story is not that different in EU. In 2008, SX4 sales were at the max. Now they have reduced, but still some website claimed that SX4 was market leader in its segment. Not sure which segment it belonged to.

But I am of the opinion that Suzuki must not get eaten away from VW. VW is not having that good an image in US where Japs and even Koreans have made a good dent. VW is more selfish overall from what I see and are yet to prove themselves in our Market. If Suzuki gets absorbed by VW, the state of Suzuki would be similar to state of Daewoo. Suzuki is not the brand VW would explore outside Asia.

At the same time, if Suzuki tries to remain independent, I am afraid their fate would be similar to that of Mitsubishi. Mitsubishi survived because of the massive backup from other Mitsubishi industries. But Suzuki's case is different. Suzuki's main image comes from sports bikes and they still command respect in that category. Mitsubishi motors is still suffering despite having great engineering ( Pajero and Cedia are very good examples and how can we forget the engines ) talent.

About a few technologies that you have posted :

DSG : We know and have thread/s IIRC about how DSG is having problems. So for sure it would hurt the tag of cheap to maintain and reliable cars from Suzuki.

Turbo Diesels : Here is where Suzuki has lost big time.

Direct Injection Petrols : Suzuki has quite an expertise in petrol engines. Apart from BMW and Honda, Suzuki is the manufacturer which had graduated from two wheelers to four wheelers. Even in developed markets like USA, Suzuki is more known for its sports bikes ( and even outboard motors ) than cars.
So here is not where Suzuki needs help from VW. For large capacity engines, yes, but for small capacity engines, Suzuki is good enough without VW, atleast for the Asian market. Also for small capacity turbo, Suzuki has sufficient experience as they are selling small turbo charged motors in Japan Kei car market.
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