Suzuki announced today that the cooperation agreement with VW has been terminated and threatened to take the case to an international court for arbitration if the German company continues to hold on to its 19.9% stake.

“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,” Osamu Suzuki, CEO of the Hamamatsu-based carmaker said today. “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.”

Wolfsburg’s answer arrived shortly after: “We are extremely disappointed that Suzuki has taken this step to terminate the agreement. There is no legal foundation whatsoever obliging us to surrender our shares. Volkswagen will continue to hold its stake.”

The two partners (…) were initially supposed to help each other, with VW providing Suzuki with access to its technology and Suzuki giving the VW Group access to the Indian market, where it holds the top spot.

Instead of cooperating, the two companies have been quarreling ever since a document in VW’s 2010 annual report described Suzuki as an “associate”.

VW then blamed Suzuki of violating their agreement by buying diesel engines from Fiat – to which Osamu Suzuki replied by accusing VW of insulting his company’s honor and demanded hara-kiri an apology, which he didn’t get.

Suzuki’s executive vice president Yasuhito Harayama said that they are willing to give VW “some time” to sell back its shares before seeking arbitration.

As a result, Suzuki’s share price fell by 2.7% in the Tokyo stock market, and VW’s by 1.2% in Frankfurt.

Instead of profiting from this deal, it looks like both companies are engaged in a lose, lose situation

Story References: Bloomberg News