Projects with Volkswagen to start rolling in Jan: Suzuki CEO

Suzuki Motor Corp and Volkswagen AG will start the ball rolling on joint projects from around January 10, after the year-end holidays, Suzuki chief executive Osamu Suzuki said on Wednesday.

Japan's fourth-largest automaker and Volkswagen last week announced a comprehensive tie-up that will see Europe's top automaker take 19.9% of Suzuki.

"We generally understand what we want from each other, through information exchanged up to now," the CEO told reporters at the launch of the new Alto microcar in Tokyo.

"Actual, detailed execution — with our people going there and their people coming here — will be after January," he said.

Suzuki said the new partners have agreed they want to develop a competitive, small car, seen as key to taking the lead in developing countries. He declined to elaborate.

Citing a top official at Suzuki's Indian unit, Maruti Suzuki India, local newspaper Economic Times said last week Volkswagen and Suzuki may develop a small car that would cost Rs2,00,000 to Rs250,000 ($4,300-$5,400).

Clarifying his comments, Maruti chairman RC Bhargava said the parent company, not Maruti Suzuki, was speaking directly with Volkswagen.

"What I have said is, one of the possibilities is that Volkswagen could outsource a small car from us," he told Reuters.

Analysts said joint development of a small, low-cost car would be mutually beneficial, giving Volkswagen the coveted know-how of profitably making tiny cars and Suzuki the economies of scale to be more cost-competitive.

"Working together in the ultra-small segment will probably reap the biggest benefit for both companies," said Fumikazu Kitagawa, managing director at Nomura Research Institute.

"With small cars, you can't go in half-heartedly. But hardly anyone dares because it's so difficult to make money."

Suzuki Motor has long been the top maker of 660cc minivehicles, a segment that exists only in Japan and gets preferential tax treatment. While the engine size is not optimum to get the best fuel economy, decades of experience in microcars has helped Suzuki build up expertise in developing cheap but reliable cars.

The first Alto model, launched in 1979, was CEO Suzuki's first major project at the helm. Costing just 4,70,000 yen ($5,250), it became an instant hit, and cumulative sales in its 30th year hit 10 million units this year.

"The Alto, for me, was the trigger for Suzuki to enter the auto-making industry," Suzuki said. "I think we will add another 10 million units at a faster pace."

Suzuki aims to sell an average 7,000 units a month of the seventh-generation Alto in Japan. The model starts at 677,250 yen ($7,561) for the commercial van, and at 7,32,900 yen ($8,183) for the passenger car model.

Suzuki said, however, that he did not expect the 660cc segment to grow in Japan next year, estimating the market in 2009 to end around 1.68 million units, down about 10% from last year.