German carmaker Volkswagen AG and Japan’s Suzuki Motor Corp plan to enter into a long-term strategic partnership, the two companies said Wednesday.

Volkswagen, Europe’s largest carmaker, is to acquire a 19.9 per cent stake in Suzuki, the German company said. At the same time, Suzuki would invest up to half of the price into Volkswagen shares. The independence of both companies was to be maintained in the partnership, Volkswagen said.

The transaction needs to be approved by authorities and should be concluded by January 2010, Volkswagen said. A Suzuki spokesman in Tokyo also said the tie-up deal still needed to be finalized. The two companies are to hold a news conference in Tokyo later on Wednesday.

The partnership with Suzuki, which is known for building small offroad cars and motorbikes, is to improve Volkswagen’s position in the Asian market.

AP reports:

Volkswagen AG will take a 20 per cent stake in Suzuki Motor Corp. for 222.5 billion yen ($2.5 billion), forming a broad alliance that could give a boost to the automakers in the fast-growing Chinese and Indian markets.

Suzuki said Wednesday it will also purchase shares in Germany’s Volkswagen worth up to half the amount the German maker buys.

The deal is expected to be completed by mid February, the Japanese automaker said. The alliance will encompass product development, production and sales.

Suzuki, which is smaller than domestic peers such as Toyota, said it was difficult to stay competitive given quickly developing automotive technology and the need for cost cuts, making a partnership necessary.

Japanese media reported Wednesday morning that a deal was imminent, saying the two carmakers could also boost their presence in expanding markets. Suzuki has a large market share in India, while Volkswagen is strong in China.

In Tokyo Wednesday, Suzuki shares rose 3.5 percent, even as the broader market fell.

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