Is This Suzuki's Moment?

The Japanese auto maker is trying to move out of the rear-view mirror by introducing an updated SUV and a new sporty hatchback

Suzuki is a car company that always seems as if it should perform and execute better than it does. Despite the fact that it has long made a respectable line of motorcycles, and is Japan's No. 1 producer of minicars, it has never earned meaningful market share in the U.S.

That might be about to change.

There are signs that Suzuki, perhaps spurred by the accelerating success of Koreans Hyundai and Kia -- which long ago passed it in U.S. sales -- is ready to take on more responsibility for living up to the standards of the motorcycle side of the house.


  This week's showing of an all new XL7 sport utility vehicle and SX4 hatchback crossover at the New York International Auto Show is a good start. The XL7 has been transformed from a rear-drive SUV to one that boasts front-wheel-drive and offers a 3.6-liter, V6 power plant.

The new engine produces 250 hp and is rated for better fuel economy, despite increased displacement over the old model's 2.7-liter. All-wheel drive and seating for seven is available. I can't vouch for how the SUV drives, but it certainly looks more modern than the old model.

The trouble is, and always has been for Suzuki, that it looks too much like other SUVs in its category. And when you are a company that only spends about $100 million across the whole lineup, it's hard to stand out against Toyota (TM), Chevy, Nissan (NSANY), Hyundai, Kia, etc.

Suzuki is calling the SX4 a "sport-compact crossover" in hopes of attracting the attention of young car buyers, especially the hot-rod set who like to spend a few thousand dollars accessorizing these kinds of cars, often referred to as "pocket rockets," or, in a nod to their country of origin, "rice rockets." It's powered by a 2-liter, 4-cylinder, 142 hp engine, and goes on sale next fall for between $15,000 and $18,000.

Koichi Suzuki, president of Suzuki's U.S. division (and no relation to the founding family), says the company and the brand have made progress in the last decade, but HE knows there is much to be done. When Koichi Suzuki arrived in the U.S. a decade ago, he recalls, he asked to have a colleague paged at an airport, and he had to go over the pronunciation of his last name with the attendant. "I put my head in my hands," he says, disbelieving that the Suzuki name was so poorly recognized in the U.S. that the woman behind the counter didn't know how to say it.


  The two new products, which join the Aerio sub-compact, Grand Vitara SUV, Forenza and Verona sedans, and the Reno subcompact, are expected to push Suzuki's sales from 82,101 vehicles in the U.S. last year, its biggest sales year since 1987, to 150,000 by 2010. "Grand Vitara was our turning point [for legitimacy], but that's not to say there weren't embarrassments in the former product line," Suzuki says.

Structurally, Suzuki has some serious issues ahead of it. It managed about 82,000 vehicle sales spread across six unique models. That compares with, for example, Subaru, which managed 192,000 sales on three basic models. Also, the company spent more than $1,000 per vehicle on advertising, about three times what its rivals spend. "We're doing it to invest in the brand," Suzuki says.

Suzuki 18 months ago initiated a new program to improve quality, a problem that has long dogged the company. While Japanese rivals have long set the standards for quality, Suzuki has hovered around the bottom of J.D. Power and Associates' quality and dependability rankings since it entered the U.S. market in the 1980s.

In Power's Vehicle Dependability Survey last year, which ranks vehicles on quality over three years of ownership, Suzuki was 31st in the industry. In the firm's APEAL survey, which asks customers how pleased they are with the design and overall execution of the car, it scored second from the bottom.

And in the Initial Quality Survey, which surveys customers about quality in the first 90 days of ownership, Suzuki ranked dead last. Those scores don't mesh with Suzuki's own research, which says 95% of its buyers would recommend their cars to their friends and relatives. "If I was at Suzuki, I would pay more attention to Power's research than their own," marketing consultant Dennis Keene says.


  Besides making improvements to its vehicles, including more sleekly designed interiors, Suzuki is trying to upgrade its dealer facilities. So far it has been able to get 100 dealers, about one-third of its network, to upgrade showrooms and repair facilities.

Suzuki for many years has been in an alliance with General Motors (GM), which recently reduced its investment in Suzuki from 20.4% ownership of the Japanese company to 3%. Suzuki, though, retains its 11% stake in Daewoo Auto & Technology, the alliance with GM in which it manufactures the Forenza and Verona models and GM's Chevy Aveo. The companies also jointly own CAMI Automotive in Canada, which assembles the Chevy Equinox and Pontiac Torrent SUVs and Suzuki's XL-7.

Only a few companies can stock their own brand of motorcycle next to their cars at an auto show or a showroom. Besides Suzuki, there's just BMW and Honda (HMC). But it's going to be a while before Suzuki cars can claim residence in the same neighborhood with those brands.

Before it's here, it's on the Bloomberg Terminal.