All is quiet on the Suzuki-Volkswagen front, which leaves one wondering if this is the proverbial calm before the storm. After a furious exchange of words for months, the disgruntled partners will now let the courts have the last word on their rocky alliance.

In the meantime, Fiat has inked a deal with Suzuki to supply diesel engines for the latter's Indian operations, from its plant near Pune. This issue, incidentally, was the core of VW's fallout with its Japanese ally, especially when it had its own diesel engine expertise to offer.

Fiat's CEO, Sergio Marchionne, who has achieved a dramatic turnaround with Chrysler, is now keen on including a third ally as part of his global consolidation goal. Reports have been doing the rounds that this could be PSA Peugeot Citroen, but it will hardly serve any purpose. What Fiat needs is a partner with a strong presence in the Asia-Pacific region, and this is where Suzuki will be its best fit, going forward.

ALLIANCES

Of course, all this will depend on the outcome of the VW-Suzuki alliance. It is no secret, of course, that the German automaker is in no mood to call it quits, and would much rather retain its 19.9 per cent stake. Assuming that the duo eventually parts ways, Suzuki is better off with Fiat, even while sceptics insist that there is no way these temperamental entities can hope to coexist peacefully during a period of time.

“Neither Suzuki nor Fiat has a particularly great performance record when it comes to alliances. To think that they will click together is only wishful thinking,” an industry veteran said. For instance, the crossholding deal between General Motors and Fiat promised plenty when it was first formed some years ago, but fell apart. Likewise, apart from VW, Suzuki has had its share of problems with the Indian Government during the Maruti journey.

However, with Marchionne at the helm, Fiat has acquired a greater sense of stability, and has the Chrysler success story to show as a case in point. It now faces its biggest challenge in recent times with the European crisis, where its home market, Italy, is threatening to fall apart.

As for Suzuki, its leadership position in India is now under a lot of pressure with worthy rivals like Hyundai, Toyota, Ford and Honda zeroing in for a share of the compact car pie.

While there is no question that a stronger ally will help Suzuki in these trying times, it isn't entirely clear if Fiat will fit the bill. In the first place, the Italian carmaker's India script has gone completely awry, despite the fact that it enjoyed the highest brand recall among all multinationals, thanks to its decades-long association with Premier Automobiles.

PRODUCT LAUNCHES

As a result, Fiat is now paying greater attention to Brazil, Russia and China when it comes to new product launches. While each of these markets will at least get three vehicles apiece (from Fiat and Chrysler) till 2014, India will just get one new small car from the Fiat stable towards the end of 2012.

Little wonder, therefore, that the company has chosen to focus more on the engine business, where it is shopping for new customers like Suzuki and Premier, and exploring geographies beyond India for shipments.

China is already being spoken of as a likely destination, though no official word is out yet on the subject. With Suzuki, however, Fiat may just be prompted to put speed up its India operations.

Apart from engines, the two companies will explore the possibility of creating joint small car platforms for emerging economies which are tomorrow's drivers. Suzuki needs access to markets beyond India for future growth, and Fiat could help make this a reality, especially in regions like Latin America and Russia.

As this decade will see car markets in China and India grow from strength to strength, forging alliances will become the order of the day. GM, which once partnered Suzuki more aggressively in India during the strong days of their alliance, is now banking on China's SAIC Motor Corp to take the story forward. Nobody would have thought this likely five years ago, but the global order changed with the Lehman crisis, which saw GM on the verge of bankruptcy.

SILVER LINING

The silver lining in the cloud was its association with SAIC, which has now emerged a force to reckon with in China. The partners are now hoping to replicate this success story in India and, with time, extend this to Thailand, Malaysia and the Philippines. Clearly, SAIC (like other Chinese automakers) wants to establish its brand across the globe and the GM alliance will help leverage this successfully.

Similarly, even while talks of a Peugeot-Fiat alliance have been doing the rounds for weeks now, the French automaker may just decide to work on strengthening its bond with Mitsubishi instead.

And not so long ago, the two were contemplating on an equity crossholding pact, but eventually called it off. This shouldn't stop them from working jointly on a global small car, where India may play a critical role as a production hub.

It was Carlos Ghosn who made (what then seemed) the unlikeliest of marriages between Renault and Nissan work like a charm. Today, as CEO of this alliance, he has gone a step further and included Daimler for a bigger global script. This very Daimler, it may be recalled, floundered in its mega merger with Chrysler, and achieved little in its other alliances, involving Mitsubishi and Hyundai.

Yet, the show will have to go on. Global automakers have realised that it is risky standing up to the new challenges all alone. And not everyone is a Toyota, Honda, Hyundai or BMW, which can last the storm without any support.

These are surely interesting times for the automobile industry, and a Suzuki-Fiat alliance will only give another keen twist to the tale.

Related Topics