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Suzuki's future is small

2010-01-21 13:58
Suzuki Motor Corp. must stick to what it does best - being a small-car maker - even as it forges an alliance with Volkswagen AG that will rank as one of the world's biggest auto empires, its chief executive said Thursday.

Last month, the Japanese automaker signed a deal with Volkswagen for the German automaker to take a 19.9 percent stake in Suzuki for 220 billion yen ($2.5 billion).

The combined annual sales of Suzuki, which makes small cars such as the Swift and the Splash, and Volkswagen, which makes the Beetle and Golf, will total about 8.6 million vehicles, rivaling - or possibly besting -the world's top automaker, Toyota Motor Corp.

But the bushy-browed Osamu Suzuki, 79, chief executive and chairman of Suzuki, has long insisted the secret of his company's success lies in its humble, penny-pinching management vision as a small operation.

Borrowing expertise

His company hopes to benefit from Volkswagen's expertise in green vehicles, such as hybrids, electric vehicles and technology to boost fuel efficiency of gas-engine cars, while Volkswagen hopes to benefit from Suzuki's presence in Asia, developing products together and sharing parts, he said.

Suzuki built its empire by selling small cheap cars, especially in Japan and emerging markets. And it wasn't about to turn into a big player, he said at the Foreign Correspondents' Club in Tokyo.

"This approach is totally wrong," he said. "If Suzuki employees start to develop an illusion they are No. 1 in the world, that will lead to a terrible mistake."

Major automakers like Toyota and Volkswagen make vehicles costing between 5 million yen ($55 000) and 8 million yen ($87 000), Suzuki noted. Suzuki cars, in contrast, cost between 500,000 yen ($5 500) and 1 million yen ($11 000).

That means Suzuki would have to produce five times the vehicles of a bigger manufacturer to rival their standing, Suzuki said.

"One must not aim too high. One must not be jealous. One must go one's own path," said Suzuki, who is highly regarded in business circles for his managerial acumen.

One of Japan's most colorful executives, Suzuki has written books, including a recent one titled, "I'm Just an Old Man at a Small Company," flaunting his stingy but some say charming approach to management.

Suzuki offices scrimp on airconditioning and have done away with receptionists. Plants have reduced electric lighting, and some Suzuki dealerships look like repair shops.

He took on the Suzuki name after he married the granddaughter of the automaker's founder.

Tie up good for Suzuki

Mamoru Katou, auto analyst with Tokai Tokyo Research, said tying up with Volkswagen was a good match for Suzuki as it needed to rev up its defenses to maintain its lead as rivals catch up in emerging markets, and competition grows in green vehicles.

"It is hard to go at it alone in developing ecological technology, and Suzuki needed an alliance," said Katou. "A possible minus is that Volkswagen may want its way in  management, risking Suzuki's individuality."

So far, Suzuki has weathered the global downturn much better than some of its bigger but money-losing rivals. Suzuki is forecasting a 15 billion yen ($164 million) profit for the fiscal year through March 2010.

The automaker controls more than half the market in India, where it ventured ahead of competition and growth opportunities are now huge. It is also strong in Pakistan, China and other Asian markets. Volkswagen is strong in Brazil and China.

Suzuki brushed off worries about a culture clash between German and Japanese management. Besides, Suzuki is not new to global alliances, he said. Last year, Suzuki closed its alliance with General Motors Co., which began in 1981. GM sold a 17% stake in Suzuki in 2006, and its remaining 3% stake last year.

"If we choose not to fight, we can both grow to No. 1 in the world. Then we are happy," he said.


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