Nissan, Suzuki to expand cooperation
Reuters / June 2, 2006 - 10:00 am
TOKYO -- Japan's Nissan Motor Co. and Suzuki Motor Corp. said on Friday they would broaden their business ties to include the use of each other's manufacturing facilities in emerging markets such as India.
Nissan, Japan's second-biggest automaker, and Suzuki, a top maker of compact cars, said the agreement would also see an increased exchange of vehicles supplied under each other's badges in a move aimed at boosting sales and economies of scale.
Automakers around the world have been relying more and more on strategic tie-ups to share development costs and jointly operate manufacturing facilities to survive tougher competition.
The latest deal also heightens speculation that Nissan could eventually aim to take a sizable equity stake in Suzuki after General Motors sold off all but 3 percent of its 20 percent holding of Suzuki shares in March.
Many analysts have since said that Nissan could benefit from Suzuki's reach in emerging markets such as India, and its expertise in building small cars.
Suzuki President Hiroshi Tsuda, however, strongly denied the possibility of a capital tie-up, while Nissan Chief Operating Officer Toshiyuki Shiga said a capital alliance was not discussed during the talks that led to Friday's agreement.
"I want to make it very clear: We are not thinking about a capital tie-up at all," Tsuda said. He repeated that Suzuki would continue only operational cooperation with GM.
From the end of this year, Nissan will supply a minivan to Suzuki on an original equipment manufacturer (OEM) basis, while Suzuki will build another minivehicle for its partner. Both products are aimed at the Japanese market.
Elsewhere, Nissan will supply a compact pickup truck to Suzuki, mainly for sale in North America from 2008. Suzuki, in return, will provide a new "A" segment vehicle for Nissan, mainly for sale in Europe.
The two companies also said they would aim to utilise each other's manufacturing facilities in emerging markets to help achieve deeper cost reductions through bigger volumes.
INDIA PRODUCTION
They declined to provide a time line or other specifics, but said they would start with production of Nissan brand cars by Suzuki at the latter's facilities in India.
The head of Maruti Udyog Ltd., Suzuki's Indian unit, said the deal meant further expansion would be required to meet Nissan's needs and also that local automobile component manufacturers would benefit from a ramp up in production.
"Certainly, further expansion will have to take place," Maruti's Managing Director Jagdish Khattar told reporters in New Delhi.
"Once we work out the details, yes investments will be required for further expansion. We have to work out where and how to get those investments."
New Delhi-based Maruti is India's top car maker and is 54.2 percent-owned by Suzuki. Over 70 percent of its output is compact cars.
"This expansion is part of Nissan's continuing drive into new market segments and further global expansion, as set out in the Nissan Value-Up business plan," Shiga told a news conference in Tokyo.
Suzuki's Tsuda also said the expansion of the alliance would boost production volume and strengthen the company's global competitiveness.
Nissan, held 44 percent by France's Renault SA, has given production of the 660cc Moco minicar to Suzuki, which sells the model as the MR Wagon under its own badge.
Nissan in turn builds a small number of Suzuki's Jimny cars in Thailand.
