Was Osamu Suzuki first to understand Volkswagen’s Diesel issues?

VW Volkswagen Suzuki

Osamu Suzuki: “we looked at Wagen’s technologies, and could not find anything we need” (Nikkei, 1 July 2011)

by Gerhard Fasol

Did Volkswagen underestimate Mr Suzuki?

Over the last 18 years myself and our company have worked on many foreign-Japanese company partnerships, therefore we always have great interest in business partnerships involving Japanese companies, and have followed the Volkswagen-Suzuki relationship closely.

We published two blog articles after the ICC Arbitration Court issues judgement sealing the Suzuki-Volkswagen divorce, and before we became aware of the Volkswagen Diesel issues:

When I was asked to brief German President Horst Köhler on April 3, 2005 about Japan’s technology sector, my advice included the following:

Interaction with Japan enforced total restructuring of leading US companies, including INTEL and MOTOROLA. According to my knowledge, there are almost no European companies yet which were forced to totally restructure their business due to interaction with Japan. I feel that this may happen in the future.

Volkswagen could be a candidate now, although US agencies and courts are now primary actors, Suzuki’s role may not be negligible.

Volkswagen had already lost out against Suzuki, and Suzuki’s CEO Mr Osamu Suzuki in the 1980s when India started to build an Indian automotive industry. India had considered to build India’s car industry based on Volkswagen’s Beatle, but decided to go with Mr Osamu Suzuki instead. Maruti Suzuki India Limited (マルチ・スズキ・インディア) achieved 45% market share in India’s passenger car market in 2014. Suzuki Motors owns 54% of Maruti Suzuki, and Mr Osamu Suzuki is greatly respected as Japan’s No. 1 top India expert.

When Mr Osamu Suzuki entered into the Maruti Suzuki India Joint-Venture, he reportedly insisted to have 100% decision making and management rights in the Joint-Venture.

Links between the Suzuki-Volkswagen and the Volkswagen Diesel issues time lines.

We can see interesting links in the time lines of the Suzuki-Volkswagen relationship and the Volkswagen Diesel issues:

Time line of events relevant to the Suzuki Volkswagen relationship

  • 16 Nov 1970: “Maruti technical services private limited” (MTSPL) to create an Indian automobile industry, first CEO: Sanjay Gandhi. Sanjay Gandhi contacted Volkswagen AG to seek a cooperation to produce an Indian version of the VW Käfer (Beatle). However, a cooperation with Volkswagen did not work out. The company failed in 1977, and was reborn as Maruti Udyog Ltd by Dr V. Krishnamurthy.
  • 1982: Maruti Udyog Ltd and Suzuki entered into a licensing and joint venture agreement, creating Maruti Suzuki India Limited (マルチ・スズキ・インディア), which in 2014 achieved a 45% market share of India’s passenger car market.
  • 20 0ctober 2005: Suzuki and FIAT announce a partnership on FIAT’s Diesel engines (see: Suzuki announcement)
  • 6 March 2006: Suzuki and GM announce the reduction of GM’s stake in Suzuki from 20% to 3%, strongly reducing the GM holding in Suzuki, which had started in August 1981. (see: Suzuki announcement)
  • 9 Dec 2009: VW-CEO Martin Winterkorn and Suzuki-CEO Osamu Suzuki announced the “comprehensive partnership” at a press conference in Tokyo (see: joint Suzuki Volkswagen press announcement)
  • 9 Dec 2009: Suzuki transferred 107,950,000 treasury shares to Volkswagen AG, valued approx at 226,695,000,000 yen (= approx. US$ 2.3 billion)
  • 15 Jan 2010: VW purchased 19.89% of Suzuki shares for about € 1.7 billion
  • March 2011: Volkswagen writes in the annual report that Volkswagen “significantly influence financial and operating policy decisions” at Suzuki
  • 1 July 2011: Osamu Suzuki publicly airs his frustrations with “Wagen-san’s” intentions in his Japanese language blog in Japan’s Nikkei “スズキとワーゲンの今とこれから (鈴木修氏の経営者ブログ)” (“Suzuki and Wagen now and the way forward”) (may need Nikkei subscription)
  • Sept 2011: Suzuki’s Board decides to terminate the partnership
  • 18 Nov 2011: Suzuki gives notice to Volkswagen of termination of partnership, Volkswagen does not reply (says Suzuki)
  • 24 Nov 2011: Suzuki files for arbitration at International Court of Arbitration of the International Chamber of Commerce (ICC) in London
  • 2013-2014: The International Council on Clean Transportation (ICCT) conducts a research project in collaboration with the West Virginia University to determine real world, away from test rigs, emissions from diesel cars in the USA. Project leader is John German. ICCT tests a VW Jetta, a VW Passat, and a BMW X5, and finds that in real world driving conditions, the VW Jetta exceeds the US-EPA Tier2-Bin5 Nix (Nitrogen Oxide) emission standards by 15 to 35 times, the VW Passat by 5 to 20 times, while the BMW X5 generally conformed to the standards except in extreme conditions. The fact that the BMW X5 conforms to the standard for the ICCT was proof that the technology to conform existed. (see: ICCT announcement)
  • 30 Aug 2015: ICC Arbitration Court issues judgement and holds the termination of the partnership valid, orders VW to sell all Suzuki shares back to Suzuki (or a 3rd party selected by Suzuki), and orders Suzuki to pay damages for breaking the agreement
  • 17 Sep 2015 8:45am: Suzuki purchases back 119,787,000 of its own shares previously owned by VW via Tokyo Stock Exchange ToSTNeT-3 system for 460,281,547,500 yen (approx. US$ 3.9 billion), completing the termination of the partnership and capital alliance with VW
  • 18 September 2015: Press announcement by The ICCT “EPA’s notice of violation of the Clean Air Act to Volkswagen
  • 18 September 2015: EPA notice of violation to Volkswagen (See: EPA announcement), EPA website concerning Volkswagen
  • 18 September 2015: California Air Resources Board (CARB) letter to Volkswagen, “Re: Admission of Defeat Device and California Air Resources Board’s Request”
  • 26 Sep 2015: Suzuki announced the transaction to sell all 4,397,000 Volkswagen shares which Suzuki owns to Porsche Automobile Holding SE, completing the termination of the partnership and capital alliance with VW

The International Council on Clean Transportation (ICCT) study on real-world exhaust emissions from modern diesel cars

The ICCT noted that there is a wide discrepancy in emissions by cars under test conditions and in real live road driving conditions, and conducted the project on real-world exhaust emissions from modern diesel cars.

The report can be dowloaded here as a pdf file: “REAL-WORLD EXHAUST EMISSIONS FROM MODERN DIESEL CARS

“In-Use Emissions Testing of Light-Duty Diesel Vehicles in the United States”

The ICCT contracted with the Center for Alternative Fuels, Engines and Emissions (CAFEE) at West Virginia University to test the real road emissions of three cars in the USA. This study is explained on the ICCT website “In-use emissions testing of light-duty diesel vehicles in the U.S.”

The final report can be downloaded here: “Final Report: In-Use Emissions Testing of Light-Duty Diesel Vehicles in the United States. by Dr. Gregory J. Thompson (Principal Investigator)“.

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