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Suzuki chairman pins hope on closer ties with Toyota

Alliance with one-time rival holds key to company's long-term future

Suzuki Motor Chairman Osamu Suzuki will turn 90 in 2020, the same year the company celebrates its centennial. (Photo by Taro Yokosawa) 

TOKYO -- For the past 20 years or so, Suzuki Motor Chairman Osamu Suzuki has been pondering the future of the carmaker he has led for four decades, striving for a vision of the company's next 100 years.

With technological shifts such as electric cars and autonomous driving clouding Suzuki Motor's outlook, and that of the industry as a whole, the chairman has bet on a deeper alliance with Japan's most powerful automaker.

On Wednesday, Suzuki Motor and Toyota Motor announced a deal in which Toyota will invest 96 billion yen ($901 million) in its counterpart, taking a 5% stake, while Suzuki Motor will buy a 48 billion yen stake in Toyota. The agreement will transform the two companies' existing tie-up into a full fledged partnership that includes joint development of new technologies.

Suzuki, who will turn 90 in 2020, the same year the company marks its centennial, has always placed great stock in open communication and close personal connections with business partners. When Suzuki Motor announced plans to make cars in India in 1983, the chairman said, "All the people here are the same. What is important is heart-to-heart connection."

At the time, no other carmaker took India seriously as a market. Now it is one of the most promising in the world -- and a key moneymaker for Suzuki Motor.

A Maruti Udyog showroom in New Delhi in 1998: Suzuki's business in India began as a joint venture with the government.   © Reuters

"From now on, competition with leading automakers will begin in India," Suzuki said repeatedly during his visits to the country in 2008, as the economy picked up steam. He predicted that Suzuki Motor would be challenged by global automaking powerhouses, which had begun waking up to the country's growth potential.

Suzuki Motor responded by investing 400 billion yen ($3.8 billion at current exchange rates) in India. The goal was to maintain the company's leading position in the fast-growing economy by investing in new production capacity, product development and dealerships. That investment has enabled Suzuki Motor to hang on to nearly half the Indian car market. Its sales of 4 million cars in 2018 now make it the world's fourth largest.

Suzuki Motor's dominance in India was a factor in Toyota's decision to team up with its smaller Japanese rival.

Suzuki has fond memories of his company's earlier partnership with General Motors of the U.S. Suzuki Motor learned a lot, including production technology, through its more than two-decade partnership with GM. The chairman described it as a teacher-student relationship. After the capital tie-up was dissolved in 2008, Suzuki said he had frank talks with GM CEOs Jack Smith and Rick Wagoner.

Not all of Suzuki Motor's relationships have gone so smoothly. The company joined hands with Nissan Motor in 2001, but that partnership did not go very well. It forged an ill-fated capital tie-up with German giant Volkswagen in 2009 that ended acrimoniously in 2015.

Commenting on these deals in an interview with Nikkei, Suzuki said he "was not on the same wavelength" with former Nissan CEO Carlos Ghosn. The partnership with Volkswagen ended without producing any useful results.

In a 1995 interview, Suzuki said companies tend to face life-or-death crises every 25 to 30 years. He would know: The carmaker had one such episode in 1950 that stemmed from a crippling labor dispute, and another in 1975 as it struggled to meet tougher emission standards.

The small-car specialist has managed to overcome these near-death experiences by diversifying far from its roots as a manufacturer of automatic looms: first into motorcycles, then into kei light vehicles with very small engines, and finally into compact cars.

Suzuki joined the company's founding family through marriage, taking his wife's name and becoming the eponymous automaker's fourth president in 1978, at the age of 48.

Three decades later, Suzuki Motor reached a fork in the road as GM flirted with bankruptcy in the aftermath of the global financial crisis in 2008. The U.S. automaker decided to terminate its business and capital tie-up with Suzuki Motor. Searching for a lifeline, Suzuki Motor teamed up with Volkswagen the following year, but the two soon found themselves at loggerheads over technology-sharing. For more than five years, it struggled to maintain its independence in the shadow of the German behemoth.

Osamu Suzuki greets Volkswagen's then-chief executive Martin Winterkorn during a news conference in 2009. The tie-up between Suzuki and Volkswagen ended acrimoniously in 2015.   © Reuters

The company's relationship with Toyota has not always been so friendly, either. After sales specialist Hiroshi Okuda became Toyota's president in 1995, he took aim at the kei car manufacturers, particularly Suzuki Motor, which had capitalized on favorable tax rules to boost its domestic sales at the expense of Toyota and other bigger competitors.

In an aggressive move, Okuda decided to turn Daihatsu Motor, the second-largest manufacturer of kei cars, into a Toyota subsidiary. Toyota spent heavily to hone Daihatsu's product development, output and sales capabilities. Okuda also used his political connections to lobby for the elimination of tax breaks for buyers of light vehicles.

Suzuki is also a tough-minded pragmatist. In 2006, the company surprised many industry executives by cutting production of kei cars, surrendering its position as the top producer of light vehicles that it had held for 33 years.

In explaining the decision to give up the crown to Daihatsu -- which the company later regained -- Suzuki stressed the importance of focusing on profitability. "What matters most for a CEO are sales and profit numbers," he said. "You cannot survive on the honor" of being the No. 1 kei maker.

Despite his ongoing battle with Okuda, Suzuki said he was able to forge close ties with members of the Toyoda family, which founded the rival automaker. He numbered among his friends Shoichiro Toyoda, who served as the company's chairman between 1992 and 1999.

When Akio Toyoda, another scion of the Toyoda clan and eldest son of Shoichiro Toyoda, became president in 2009 with the departure of Okuda, the frosty relations between Toyota and Suzuki Motor started to thaw.

Toyota and Suzuki Motor have more in common than it appears, as do the Toyoda and Suzuki families. The founders of both companies hail from Shizuoka Prefecture, in central Japan, and both automakers started out making looms.

Suzuki was told by his predecessor to seek help from Toyota when his company fell into serious trouble, according to a close aide to the chairman.

In fact, Suzuki Motor was rescued by Toyota twice. When the company's forerunner, Suzukishiki Loom, was brought to the brink by a labor dispute in 1950, Toyota extended a loan. In the 1970s, when Suzuki Motor had trouble meeting new emissions standards, Toyota's then-president, Eiji Toyoda, supplied Daihatsu engines to Suzuki, citing the need to maintain the health of the Japanese auto industry.

Suzuki Motor CEO Toshihiro Suzuki speaks at a launch event for the new Wagon R compact in February 2017.    © Reuters

Although Suzuki's eldest son, Toshihiro, became president of Suzuki Motor in 2015, the chairman has remained at the helm, vowing to continue as long as he is able. "I discount my age by 30%," Suzuki said. "I will retire when I become physically too weak, but I intend to keep working as long as I can. I can take as much paid vacation as I like after I die."

Suzuki has weathered the periodic crises that have buffeted his company, including the end of the GM partnership, the death of a grandson who was being groomed as his successor and a grueling court battle with Volkswagen, thanks to his knack for spotting problems and taking timely action to solve them.

But the challenges posed by shifts in the auto industry, including the need to invest heavily in so-called CASE technologies -- connectivity, autonomy, sharing and electrification -- have sharpened competition in a way that will challenge even Suzuki's management acumen.

Hiroshi Kotani, Assistant business and market news editor, Nikkei Asian Review contributed to this story.

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