American Suzuki Says Demand for Cars Up After Bankruptcy

(Corrects to add role of independent directors in fourth paragraph of story published Dec. 20.)

American Suzuki Motor Corp. (7269), the U.S. distributor of Suzuki cars and motorcycles, will import about 2,500 more autos to meet demand that jumped after the company filed for bankruptcy with plans to end U.S. sales.

“When we told dealers, ‘We have one last chance,’ the dealers said, ‘Go get them,’” M. Freddie Reiss, the company’s chief restructuring officer, said today in an interview. “No more cars are being manufactured” for the U.S. market, he said.

American Suzuki’s November auto sales rose 22 percent to 2,224 units, the company said this month. Dealers reported that sales also climbed in December, mainly because of generous incentives and a seven-year warranty program, Reiss said. Even with the spurt in sales, the company still can’t justify staying in the U.S. auto market, he said.

Last year, Suzuki Motor Corp., based in Shizuoka, Japan, appointed two independent directors to the distributor’s board, Reiss said in an e-mail. Those directors formed a committee that put American Suzuki into bankruptcy Nov. 5 to end losses in the U.S. market, avoid the costs of federal regulations and shut down a sales network in which 69 percent of dealers sell fewer than five cars a month.

The company will sell about 22,000 cars this year in the U.S., compared with about 120,000 a year before 2008, Reiss said.

Dealers will sell their remaining cars and continue to provide parts and warranty work and other repairs, the company said. American Suzuki plans to reorganize its motorcycle, boat and all-terrain vehicle business and make sales through separate dealers, according to court papers.

Motions Approved

Today, the company was in U.S. Bankruptcy Court in Santa Ana, California, where it won permission for three motions designed to help it shut down the auto-dealer network and reorganize the motorcycle and boat business.

U.S. Bankruptcy Judge Scott Clarkson approved the company’s request to borrow $50 million more in order to import the additional cars from Suzuki Motor.

Clarkson also approved a settlement with dealers intended to avoid litigation over the shutdown.

Suzuki Motor had asked its car dealers to voluntarily cancel their existing franchise agreements in exchange for half of what they are owed immediately and the rest through the normal bankruptcy process, according to court papers.

American Suzuki owes its parent about $152 million, according to court records. To help guarantee that dealers who settled will be repaid everything owed to them, Suzuki Motor agreed to subordinate that debt, according to court documents.

Affiliate Bid

American Suzuki also won permission to sell its motorcycle, boat and ATV distributorship to an affiliate of Suzuki Motor for $95 million barring a higher bid. Clarkson overruled an objection from the U.S. Trustee, the arm of the U.S. Justice Department that monitors corporate bankruptcies, which argued that Suzuki Motor’s involvement would discourage competing bidders.

The case is In re American Suzuki Motor Corp., 12-22808, U.S. Bankruptcy Court, Central District of California (Santa Ana).

To contact the reporter on this story: Steven Church in Wilmington, Delaware at schurch3@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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