July 10 (Bloomberg) -- Suzuki Motor Corp. and Mitsubishi Motors Corp., suffering from plunging U.S. sales and excess North American plant capacity, may have to quit the market after a quarter century.

Suzuki, Japan’s fourth-largest carmaker, reported a 78 percent drop in unit sales in June, pushing its first-half decline to 60 percent, the market’s worst. Mitsubishi is down 51 percent this year, and is stuck in a slump that began in 2003.

Both carmakers “should withdraw from the U.S.,” said Yuuki Sakurai, chief executive of Tokyo-based Fukoku Capital Management Inc., which oversees about $10 billion in Tokyo. “It’s time for them to decide whether they pay a high price to continue business there or stop the bleeding.”

Recession, joblessness and weak consumer confidence pushed U.S. auto sales to the lowest since 1976, bringing bankruptcies for General Motors Corp. and Chrysler LLC and a record loss at Toyota Motor Corp. Truckmaker Isuzu Motors Ltd., which halted U.S. consumer sales in January, is the only Japanese brand less familiar to carbuyers than Suzuki or Mitsubishi, according to industry analyst Alexander Edwards.

“Both are struggling with getting customers to initially even consider them,” said Edwards, head of auto research for San Diego-based Strategic Vision Inc.

Currently, they rank in the “bottom five” of 35 brands Strategic Vision tracks, he said. To reverse that, both need to boost their U.S. marketing budgets, Edwards said.

“We’re not talking about a one-time investment, but a consistent, sustained effort,” he said. “If they’re looking for a quick fix, continuing in the market will be tough.”

‘Never Give Up’

“We will never give up the U.S. market,” Mitsubishi Motors President Osamu Masuko said on July 9 in Tokyo. “The U.S. will return to being the world’s biggest market.”

Masuko also said the company isn’t pursuing alliances with other carmakers in the U.S. or planning to use its Illinois factory to supply vehicles to other brands.

Mitsubishi Motors had a 23.6 billion yen fiscal loss in North America last year, equal to 43 percent of its global loss of 54.9 billion yen. Suzuki had a 24.1 billion yen ($258 million) loss in North America in the fiscal year that ended in March, the only unprofitable region for the Hamamatsu Japan- based company, which earned 27.4 billion yen worldwide.

Suzuki sold 84,865 vehicles in the U.S. last year, a 17 percent drop. Mitsubishi sold 97,257 vehicles, down 25 percent.

Toyota, Honda

Toyota, the world’s largest automaker, has about 30 times the U.S. sales volume of either Suzuki or Mitsubishi, retailing 770,449 vehicles this year. While Toyota’s U.S. sales are down 38 percent this year, its 16 percent market share dwarfs the respective 0.6 percent for each company.

Honda Motor Co., Japan’s second-biggest automaker, has 11 percent U.S. market share and 20 times the sales volume of its two smaller rivals. The Tokyo-based company’s have fallen 34 percent this year.

Suzuki rose 1.7 percent to 2,125 yen at 3 p.m. close of Tokyo trading. The shares have gained 73 percent this year. Mitsubishi Motors rose 0.6 percent to 164 yen in Tokyo and is up 34 percent this year.

Both companies also have North American auto-assembly plants that are under-utilized. Cami Automotive Inc., the Ingersoll, Ontario, factory Suzuki operates as a joint venture with GM, stopped making Suzuki’s XL7 sport-utility vehicle this year. Suzuki hasn’t announced a new model to be built there.

GM makes Chevrolet Equinox and Pontiac Torrent SUVs at Cami, and on June 26 said it will make the GMC Terrain crossover at the Canadian plant. Cami’s output is down 78 percent this year through July 4, according to trade publication Automotive News.

Plunging Production

Production at Mitsubishi’s Normal, Illinois, plant, has plunged 83 percent so far this year, according to Automotive News data.

Tokyo-based Mitsubishi is now using just 10 percent of the plant’s capacity and may shut it down this year, said CSM Worldwide analyst Masatoshi Nishimoto.

Mitsubishi “doesn’t make cars that are hot-sellers in the U.S.,” said Nishimoto, who is based in Tokyo.

Fumio Nishizaki, a Tokyo-based spokesman for Mitsubishi Motors, said the company isn’t planning to close the Illinois plant. Mitsubishi hasn’t announced replacements or additions to its current lineup of midsize and compact cars and SUVs in more than a year. The company hopes to sell the i-MiEV electric car in the U.S. by 2010, after introducing the model in Japan this month.

The car travels 160 kilometers (100 miles) when its lithium-ion batteries are fully charged, and is priced at 4.6 million yen, or about $49,000.

CSM forecasts global demand for electric cars won’t exceed 100,000 units until 2014, suggesting U.S. sales of a limited range mini-vehicle such as i-MiEV may be small.

Design Studio

Mitsubishi in March shut its U.S. design studio to cut costs. In January, the company said the poor-selling Raider pickup truck, supplied by Chrysler, would be discontinued.

Suzuki, Japan’s second-largest minicar makers, said in March 2008 it would add a mid-size sedan designed for the U.S. by 2010, aiming to expand sales of more lucrative models. The car would compete with Toyota’s Camry and Honda’s Accord, the segment’s usual top-sellers.

The so-called Kizashi model is still in development, said Hideki Taguchi, a company spokesman. “Because of the current market situation, we’re reviewing the plan as to where and when to sell,” he said.

Adding such a model in the U.S. is a challenge, given Suzuki’s specialty in smaller vehicles, said Yasuaki Iwamoto, an auto analyst at Okasan Securities Co. in Tokyo.

“It makes more sense for Suzuki to put its limited resources into small cars,” said Iwamoto. “Forget about America.”

To contact the reporters on this story: Kiyori Ueno in Tokyo at kueno2@bloomberg.net; Alan Ohnsman in Tokyo at aohnsman@bloomberg.net

Last Updated: July 10, 2009 03:19 EDT