India offers Suzuki Motor a cushion against the fallout from improper testing. Like smaller rival Mitsubishi Motors, the Japanese carmaker has spooked investors by admitting it ran dodgy fuel-economy tests.
By Suzuki’s account, the violations sound less serious. In any case, so much of Suzuki’s value hinges on its Indian subsidiary that the risks to shareholders appear limited.
Suzuki shares plunged more than 9 percent on May 18 as investors braced for a detailed account of how the auto industry's latest miscreant had veered off the road.Japanese authorities may yet take a dim view of Suzuki’s infractions, even if the end-results weren’t too far off. Fines could follow. The bad publicity could also dent domestic sales. Still, even if Suzuki is being overly optimistic, shareholders have some pretty robust downside protection, thanks to the group’s 56 percent holding in Indian-listed Maruti Suzuki . It (the stake) is now worth about $10 billion while Suzuki’s overall market value is merely $11.8 billion after the latest drop. So, very little value is being ascribed to the rest of Suzuki, even if a big “conglomerate discount” is slapped on the Maruti Suzuki stake. That makes it hard to see Suzuki stock falling much further.
