- Termination of the Framework Agreement regarding the Business Alliance and Cross-holding of Shares with Volkswagen AG
Suzuki Motor Corporation (“Suzuki”) has today terminated the Framework Agreement in accordance with the terms of that agreement and has notified Volkswagen AG of such termination. Suzuki has also notified Volkswagen AG of Suzuki’s demand that Volkswagen AG transfer its Suzuki shares to Suzuki or its designated third party.
Suzuki and Volkswagen AG entered into the Framework Agreement in December 2009, recognizing each other as independent equal partners and in so doing agreed to facilitate, among other things, access to Volkswagen AG’s technology. Volkswagen AG’s shareholding of 19.89% of Suzuki shares was required by Volkswagen AG to enable this access. Despite this, Volkswagen AG did not allow Suzuki access to Volkswagen AG’s core technology and it also became clear that there were differences between Suzuki and Volkswagen in the understanding of “independence.” Suzuki cannot therefore establish a relationship of mutual trust which is the basis for collaboration between the two parties.
Suzuki, therefore, served Volkswagen AG with a “Notice of Breach” on 14 October 2011, and therein notified Volkswagen AG of a certain period of time for Volkswagen AG to take remedial action in accordance with the agreement. However, Volkswagen AG has not taken any remedial action. To date, Suzuki has repeatedly made requests to Volkswagen AG to agree to have amicable discussions to terminate the business and capital relationship, but unfortunately Volkswagen AG has not agreed to such requests.
As a result of the termination, the cross- shareholding alliance must be dissolved immediately and in so doing the parties will return to their independent status before the agreement. Volkswagen AG cannot increase or decrease its proportion of Suzuki shares without Suzuki’s consent even after the termination of the Framework Agreement.
Unless Volkswagen AG effectuates the disposition of Suzuki shares to Suzuki or its designated third party immediately, Suzuki will begin arbitration, in order to re-establish the genuine independence of Suzuki by compelling the disposition of Suzuki shares to Suzuki or its designated third party.
Prof. Dr. Ferdinand K. Piëch, Chairman of the Supervisory Board of Volkswagen AG, Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen AG, and Mr. Osamu Suzuki, Chairman and CEO of Suzuki, have engaged directly on the issues that have arisen since the formation of the alliance. The problems that both parties have recently encountered were clarified through this engagement at the most senior levels of each business and therefore Suzuki believes that their explanation will be required in the arbitration proceedings.
Suzuki’s Chairman and CEO Osamu Suzuki said today, “Today Suzuki terminated the partnership with VW. Suzuki will be seeking the return of its shares from VW in arbitration. I am disappointed that we have to take this action but VW’s actions have left us no choice. They have continued to refuse our attempts on numerous occasions to resolve these issues through negotiation. I am more disappointed that having shaken the hand of Dr. Winterkorn in agreeing to this partnership, he has not honoured his commitment to grant Suzuki access to what was originally agreed. In the absence of VW’s cooperation and given its failure to do what was agreed, there is no basis for the partnership to continue. With the cessation of the partnership there is also no basis for VW to hold on to Suzuki’s shares. We will now work to restore the relationship between Suzuki and VW to its original state as independent parties who do not restrict each other’s business. I call on Dr. Winterkorn to honour this.”
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