Volkswagen and Suzuki in contract spat over engine deal
Baku, September 12 (AZERTAC). German carmaker Volkswagen has accused its Japanese partner Suzuki of breaking the terms of their co-operation agreement.
Volkswagen said Suzuki`s deal to source diesel engines from Italian carmaker Fiat was a contractual breach.
The Japanese carmaker had picked Fiat to supply engines for its Hungarian-built SX4 crossover.
Volkswagen bought a 19.9% stake in Suzuki for 1.7bn Euros ($2.3bn; £1.4bn) in December 2009.
"Volkswagen considers this step regrettable, but necessary, and has offered to discuss the matter with Suzuki," the German carmaker said.
Suzuki, however, has denied that it breached the agreement.
"We can affirm that we have not breached the contract," Suzuki spokesman Hideki Taguchi said.
Suzuki has been buying diesel engines from Fiat since 2006 for the SX4 Crossover.
Analysts said the company had already incorporated the engines into their cars and to change the supplier would incur extra costs for the Japanese carmaker.
"It will take a fair bit of redesign of their cars in order to incorporate Volkswagen engines in those models," Christopher Richter of CLSA Asia-Pacific Markets told the BBC.
"It will require a larger investment on Suzuki`s part," he added.
At the same time, analysts said that Suzuki has maintained that technology used by Volkswagen is more expensive.
They said if Suzuki started using a more costly engine in its cars, it would either have to lower its profits or pass on the added cost to the consumers, both of which were not viable options.