Volkswagen-Suzuki battle gets worse

Volkswagen AG,Europes largest carmaker,stood by its accusation that Suzuki Motor breached a partnership agreement,rejecting the Japanese companys calls to restore its honour.

Suzuki has to correct an alleged contract violation stemming from its purchase of engines from Fiat,VW said on Friday in an e-mailed statement. The Wolfsburg,Germany-based company was responding to Suzukis demand earlier on Friday to retract the accusation.

I cant conceive how this conflict can possibly be resolved, said Daniel Schwarz,a Frankfurt-based analyst at Commerzbank who recommends buying VW shares. The chances are growing now that the partnership accord will be dissolved.

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Suzuki wants to end the 20-month-old carmaking alliance after VWs 222.5 billion yen ($2.9 billion) investment failed to yield a single project. The relationship has escalated into a public feud after the German carmaker,which owns 19.9% of Suzuki,said it could influence decisions at the Japanese manufacturer.

Suzuki never breached the agreement by buying diesel engines from Fiat,Chairman Osamu Suzuki said in a separate statement on Friday. The allegation had significantly disparaged Suzukis honour.

In response,VW said that it failed to understand how adhering to contractually defined rights can be defamatory. From Volkswagens perspective,every effort has been made from the start to continue the partnership, the company said in the statement.