VW goes global

Yesterday's news that VW is buying a 19.9% share in Suzuki and that Peugeot is considering a tie-up with Mitsubishi, shows that car companies are responding to the economic problems by trying to become genuinely global.
The VW tie up is the most interesting. VW is determined to become the world's biggest car company (it is currently Number 2 behind Toyota) and Suzuki can give it a helping hand.

The minority shareholding means Suzuki sales will not count towards to the VW total, but Suzuki has a lot of useful expertise. While VW is huge in China, Suzuki is the biggest player in India and VW would love to replicate some of its Chinese success in the other big Asian market. The other thing that Suzuki brings to the market is expertise in city cars. Although not a big company in Japan for family cars, it is very strong in Kei cars, the 660cc city cars that enjoy tax advantages in Japan (and form the basis of the Indian Suzuki Maruti). VW is pretty lacklustre when it comes to city cars – the Brazilian-made Fox is VW's least competitive design. A VW with good city cars and a growing presence in India is a prospect to strike real fear into Toyota.

The other tie up is more problematic. Peugeot already takes cars from Mitsubishi (the 4007/C-Crosser is a rebadged Mitsubishi Outlander), so it is no surprise they are talking to each other. However, Mitsubishi has a difficult history. Daimler Chrysler (as Mercedes used to be called) took effective control of Mitsubishi in 2000 in the hope that it could repeat Renault's huge success in taking over Nissan.

However, it turned out to be a complete failure for an unexpected reason. Whereas Nissan knew it was on the verge of collapse and would take orders from anybody who sounded like they knew what they were doing, Mitsubishi was in denial. Partly owned by the giant Mitsubishi Corporation, the management blithely assumed the Corporation would always bail it out, so never buckled down to the wrenching changes required to make the company competitive. Mercedes eventually lost patience and sold out in 2005. If Peugeot goes ahead with a deal, it must be hoping that a post credit-crunch Mitsubishi will be a lot more docile

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