In the automotive industry, where globalisation and diversification proceed in parallel, both VW and Suzuki are planning to establish a cooperative relationship while respecting each other’s independence as a stand-alone entity

Europe's largest car manufacturer Volkswagen Aktiengesellschaft (VW) said it has signed a pact with Japan’s Suzuki Motor Corp (Suzuki) to establish a long-term strategic partnership and would also buy a 19.9% stake in Suzuki for 2,061 yen per share or for 222.5 billion yen (about $2.54 billion).

In a release, the company said that Suzuki, in turn, intends to invest up to one half of the amount received from the stake sale into Volkswagen.  

“Two of the world’s leading car-makers are joining forces and preparing to meet the growing challenges that lie ahead.  Together we can maximize our opportunities for growth. We are proud to be cooperating with such an esteemed and valued partner,” VW chief executive Martin Winterkorn said.

Representatives of both the companies signed a framework agreement on Wednesday. The companies plan a joint approach to the growing worldwide demand for environmentally friendly vehicles, the release said.

The deal is expected to close by January 2010 subject to approval of relevant authorities."Both parties are focused on achieving synergies in the areas of rapidly growing emerging markets as well as in the development and manufacturing of innovative and environmentally friendly cars", Suzuki said in a release.

In the automotive industry, where globalisation and diversification proceed in parallel, both companies will establish a cooperative relationship while respecting each other’s independence as a stand-alone entity, the release added.

Commenting on the deal, Suzuki's chairman and chief executive, O Suzuki, said,"“We were very much impressed by the enthusiasm of Volkswagen towards manufacture of splendid automobiles. The companies shall cooperate taking advantage of the strength of the other with the maximum consideration to the global environment.  We will also continue to extend our utmost efforts for customer satisfaction."

As demand continues to rise for smaller cars and for powertrains with higher fuel efficiency and lower CO2 output, Volkswagen and Suzuki will offer a compelling solution for customers in emerging markets buying a car for the first time and also for customers in advanced economies seeking to lower their CO2 footprint while still enjoying the freedom of transport offered by an exciting range of cars, the release added.

Suzuki, Japan's third-largest car-maker, holds a 54% stake in India's largest car-maker, Maruti Suzuki India Ltd.