VW agrees to buy 19.9% of Suzuki to boost India sales

A decline in worldwide auto sales this year is prompting carmakers to form alliances and shift investment to emerging markets, which have withstood the slump amid economic growth and government subsidies. PSA Peugeot Citroen, Europe's second- biggest carmaker, and Japan's Mitsubishi Motors Corp. are in talks to deepen a strategic partnership that may involve an equity tie-up, the companies said last week.

Volkswagen Supervisory Board Chairman Ferdinand Piech has said he wants to bolster the company with additional brands. The company this week completed the purchase of a 49.9 percent stake in Porsche Automobile Holding SE's car-making unit.

“A Suzuki deal would be a bit more game-changing than Porsche,” said Philippe Houchois, an analyst with UBS AG in London. In the Porsche transaction, “Volkswagen is paying full price in an area where it's already strong — Europe and luxury cars.”

Volkswagen Chief Executive Officer Martin Winterkorn has a 10-year goal of increasing VW-brand deliveries by 80 percent to 6.6 million vehicles by 2018. The manufacturer also wants to overtake Toyota, the world's biggest carmaker, in global deliveries and profit margins by 2018.

To help finance its takeover of Porsche, VW, whose other brands include Audi, Skoda and Bentley, has shareholder authorization to sell as many as 135 million preferred shares, valued at 8.7 billion euros at market price.

Michael Brendel, a spokesman at Volkswagen, said there hasn't been a decision on whether Suzuki will acquire VW's ordinary shares or non-voting preferred stock.

Suzuki forecasts global sales of 2.3 million vehicles in the fiscal year ending March 31. Volkswagen said in October it may deliver 6.2 million units in 2009. The combined figure exceeds Toyota's sales estimate of 7 million for the current fiscal year.

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