Suzuki to Exit U.S. Car Market After Almost Three Decades
Suzuki Motor Corp. will pull out of the U.S. car market after almost three decades, following Saab Automobile and Isuzu Motors Ltd. (7202) among automakers making their exits after failing to earn profits in the country.
Suzuki will stop the sale of new automobiles in the U.S., though it will continue offering motorcycles, all-terrain vehicles and boat motors, the Hamamatsu, Japan-based carmaker said in a statement today. The company’s U.S. distributor filed for bankruptcy protection in Santa Ana, California as part of the reorganization.
The withdrawal marks the end of a business that began in 1985 and never managed to win over U.S. consumers as Toyota Motor Corp. (7203) and Honda Motor Co. (7267) did. The move allows Suzuki, which has the smallest U.S. market share among Asian automakers, to focus on defending its lead in India, where the company is facing mounting competition from Hyundai Motor Co. (005380)
“Suzuki is no longer among the carmakers like Toyota or Honda to have an advantageous position in the U.S., so why not focus on what it is good at?” said Satoshi Yuzaki, Tokyo-based general manager at Takagi Securities Co. “It makes sense for Suzuki to focus on India and other Asian markets.”
Suzuki’s sales in the U.S. will stop after its current inventory runs out, said Ei Mochizuki, a Tokyo-based spokesman.
American Suzuki Motor, the wholly owned U.S. distribution unit, agreed to begin reorganization proceedings under Chapter 11 of the U.S. Bankruptcy Code, Suzuki said. The unit had $346 million of debt and $233 million in assets as of Sept. 30, according to bankruptcy filings.
Suzuki will retain dealerships to maintain existing vehicles, Hideki Taguchi, a company spokesman in Tokyo, said today.
American Suzuki Financial Services, owed $891,000, is listed as the largest creditor without collateral backing its claim, according to court filings yesterday.
Suzuki’s sales in the U.S. during the first 10 months of the year fell 4.7 percent to 21,188 vehicles, giving it a market share of 0.2 percent, according to researcher Autodata Corp. By comparison, Toyota’s share was 14.4 percent.
The departure will leave Mitsubishi Motors Corp. (7211) as the smallest Japanese automaker selling vehicles in the U.S. Mitsubishi’s sales this year have fallen 29 percent to 50,103, reducing its market share to 0.4 percent from 0.7 percent, according to Autodata.
Suzuki shares rose 0.7 percent to 1,847 yen at the close of trading in Tokyo. The stock has gained 16 percent this year, exceeding the 6.2 percent increase in the benchmark Nikkei 225 Stock Average index.
Suzuki entered the U.S. in 1985 with the Samurai compact sport utility vehicle. A year later, it agreed to form a joint venture with General Motors Canada to produce cars at a factory in Ingersoll, Ontario. Production at the venture called Cami Automotive Inc. began in 1989.
Sales of the Samurai plummeted after Consumer Reports magazine in 1988 said that the model was likely to roll over during accident-avoidance tests. Suzuki sued Consumers Union of U.S. Inc, the magazine’s publisher in 1996, and settled the suit in 2004.
After its best-ever year in the U.S. in 2007, when it sold 102,000 vehicles, Suzuki dissolved its Canadian venture with GM in 2009, following the collapse of Lehman Brothers Holdings Inc. that roiled markets worldwide. Suzuki has been importing its cars from Japan since then.
The company follows truckmaker Isuzu, which halted U.S. consumer sales in 2009. Saab sold its final six vehicles in the U.S. in July, according to Autodata. National Electric Vehicle Sweden AB, a Chinese-Japanese investment group, in June agreed to buy bankrupt Saab.
Exiting the U.S. market will allow Suzuki to focus on emerging markets such as India and Southeast Asia. Maruti Suzuki India Ltd. (MSIL), the company’s biggest unit, is the largest carmaker by volume in Asia’s third-biggest auto market.
India accounted for about 1 million units or 40 percent of Suzuki’s 2.49 million deliveries in the year ended March 31, according to data compiled by Bloomberg, as the automaker builds new factories and adds assembly lines in the South Asian nation. Maruti will open its sixth plant next year at Manesar near New Delhi, raising its capacity to 1.75 million units.
Maruti, which controls about 42 percent of the car market, is also working on a new factory in the western state of Gujarat that will add a further 250,000 cars annual capacity. The expansion comes as automakers such as Hyundai and Volkswagen AG (VOW) look for a greater share of the market, with the South Korean company announcing Nov. 1 that it would spend $300 million in India to build a new engine plant and press shop.
Suzuki will raise annual capital expenditure to about 200 billion yen ($2.5 billion) over the next five years from about 120 billion yen in the past five-year period, Naoki Aizawa, director of the carmaker said in June. The investment will help expand manufacturing in India, Hungary and Thailand, he said.
Suzuki has already booked 12.8 billion yen, the amount of its investment in American Suzuki Motor, as an impairment loss, Mochizuki said without providing a timeframe. It has also allocated 9.7 billion yen for bad debts from the U.S. unit for the first half of this year, the spokesman said.
The case is In re American Suzuki Motor Corp. (7269), 12-22808, U.S. Bankruptcy Court, Central District of California (Santa Ana).
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