Toyota & Suzuki Ties Up for Deal Exploration

October 13
6:00 AM 2016

Toyota and Suzuki, two of the famous Japanese automakers said Wednesday that they are exploring a business partnership. This is along with Toyota taking the unusual step of acknowledging that it may be trailing its competitors on cross-industry ties.

Toyota and Suzuki jointly said they had agreed "to start exploring ideas" for a business deal, which could involve collaboration on research and development, safety engineering or information technology.

To be sure, a key catalyst for the deal is a need by Suzuki, to get some help in navigating the costly road to meeting automotive regulatory requirements around the world. The company's rocky relationship with German automaker Volkswagen recently unravelled and the company withdrew from the U.S. market a few years ago.

However, this potential partnership is not just for Suzuki's benefit. Toyota likewise admitted that "it may be behind competitors in North America and Europe when it comes to the establishing standards with other companies and partnering with them, suggesting that the world's largest automaker may be poised for change.

IHS Markit managing director James Chao said Toyota may want to tap Suzuki's expertise for low-cost manufacturing aimed at emerging markets such as India.

It's not clear whether a technological or manufacturing partnership between the two companies could pave the way for Toyota to acquire Suzuki outright or make an investment. But many in the industry believe consolidation is inevitable as manufacturers scramble to bolster fuel economy performance and meet emissions standards.

"For Suzuki, the capital needed to continue to be globally competitive may be reaching levels which may exceed their resources. At the volumes that Suzuki produces, it's tough to stay competitive given the ever tightening regulations around the world, not to mention rising consumer demands for new technologies and features." IHS Markit managing director James Chao explained further.

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