The spat between Suzuki and Volkswagen is turning out to be a free-for-all slanging match with no sign of a solution in sight.

On Thursday, the Japanese automaker made it known that it was asking VW to deny a statement it had made ten days earlier relating to the violation of a diesel engine agreement. The reference was clearly to Fiat which will supply engines to Suzuki, a move that prompted VW to issue a notice to its ally.

Clearly, this has not gone down too well with Mr Osamu Suzuki, Chairman and CEO. “On September 11, VW sent us a notice alleging that Suzuki committed a severe breach of our agreement. Suzuki never breached our agreement. VW's notice and press release significantly disparage Suzuki's honour,” he said in a statement.

Heating up

Will VW apologise or will the matter end up in court? It is eventually up to the duo engaged in this verbal volley. Mr Suzuki added that the partnership was a VW-led initiative where his company ‘gradually realised' that with VW's minor 19.89 per cent shareholding, it could not have the ‘initially promised' access to technology.

“Patiently, we continued efforts to materialise cooperation which will be a win-win for both companies. However, this partnership does not bring us benefits we expected but turned out to be a ‘ball-and-chain' for our managerial independence,” he said.

It remains to be seen how VW will react to the latest salvo though it is rather clear, at least for the moment, that it is in no mood to exit Suzuki. Auto industry observers believe the German automaker will increase its stake, a view which goes in line with recent reports suggesting a hostile VW takeover of Suzuki is on the cards. Nobody knows whether this will actually happen as it will need careful scrutiny of the pact signed between the two companies in December 2009.

“Typically, there are a host of clauses in any agreement intended to protect the interests of either party in the event of a split. Should this be the case, it will not be easy for VW to walk all over Suzuki,” an industry veteran said.

Despite this, the German company is not likely to make things easy for its ally by agreeing to exit. It has already made it known that this is an investment which it plans to hold on which means that it will the single largest shareholder in Suzuki. To that extent, the chances of a takeover cannot be ruled out. After all, this is a company with a host of top brands in its kitty and striving to be the world's top automaker by 2018.

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