Volkswagen to buy 20% stake in Suzuki Motor

Germany's Volkswagen (VW) is to buy a 20% stake in Japan's Suzuki Motor for 222.5bn yen ($2.5bn; £1.5bn).

Suzuki said it would acquire a stake in VW in return, spending "up to one half" of the funds it receives on VW shares.

In a joint statement the two carmakers said that they had "reached a common understanding to establish a close long-term strategic partnership".

Analysts said VW was keen to utilise Suzuki's expertise in making small, fuel efficient cars.

VW, Europe's largest carmaker, is due to buy its stake in Suzuki by February.

Financial help

"Two of the world's leading carmakers are joining forces and preparing to meet the growing challenges that lie ahead," said VW chief executive Martin Winterkorn.

"Together we can maximise our opportunities for growth."

Car industry analyst Chizuko Satsukawa, of Standard & Poor's, said the deal would give Suzuki welcome access to investment funds.

"Financially speaking, it's helpful for Suzuki to have a partner to invest in future technologies," said Mr Satsukawa.

Last month, Suzuki tripled its forecast for full-year operating profits.