Suzuki Ends U.S. Car Sales: Why It Had to Do It (And Other Brands That Could Disappear)
We re in the midst of an automotive reckoning. Suzuki s announcement this week that it will no longer be selling cars in the U.S. makes it the 10th major brand to disappear since the start of the century. Of those, one was a Ford brand, one was a division of Chrysler, and the remaining eight all were either subsidiaries of or close partners with General Motors. (Many we recapped in our Decade in Review .) Like Isuzu, another U.S. evacuee and estranged GM ally, Suzuki will continue selling cars outside the U.S. Why did Suzuki, Japan s fourth-largest car company, leave? And why does this keep happening?
A multi-dimensional look at Suzuki s U.S. sales
The Short Answer
The tl;dr explanation—that s too long; didn t read in internet-ese—is that even though Suzuki has two models that really are quite good, Suzuki isn t selling enough cars and can t compete with the big guys. The Kizashi and the SX4 may be virtuous, but the buyers aren t coming. Suzuki s U.S. sales peaked in 2007, with about 102,000 units sold, and fell to just a quarter of that last year. It becomes a death spiral: Dealerships close, fewer cars are sold, the company has less money, debt piles up, and public image evaporates. Suzuki has no product in the pipeline for the U.S. and fewer corporate partners to lean on for rebadges.
In other countries, the situation isn t so grim. Suzuki sells micro-size kei cars by the boatload in Japan, its Wagon R often the top-selling small car in the country. India, too, is a stronghold for Suzuki, where its Maruti Suzuki brand unloads cheap, cheerful transportation to an exploding middle class.
Loss of Product Partners
Suzuki s core competency is in small cars and small SUVs. Really small. So to offer a full product lineup in the U.S. Suzuki has had to snuggle up to several corporate partners. The late Forenza and Reno were developed by GM Daewoo in Korea, back when Suzuki owned 15 percent of GM Daewoo and General Motors owned 20 percent of Suzuki. The Equator pickup was a Nissan Frontier with the Superman logo slapped on the front, while the XL7 crossover was built on the General Motors Theta platform used for the Chevy Equinox .
But Suzuki couldn t properly align with new friends to supply the product it needs—and even if it could, the result threatens profit margins. Ties are mostly severed with General Motors. A deal with Volkswagen fell through. Fiat, which sells a rebadged SX4 in Europe, has talked about closer ties with Suzuki but no deals have been announced. Developing products and platforms on your own is expensive and difficult; Suzuki can swing that kind of investment for the small cars it sells so well in other countries, but without much of a market for big ones like the Kizashi outside the U.S. it makes little sense.
The market for cheap, imported econo-cars—often even designed overseas—from niche companies has all-but disappeared, with Suzuki one of the last survivors among a field that included Geo, Isuzu, Yugo, Daewoo, Eagle, and Daihatsu. Mitsubishi continues to limp along. All were felled by competition from the big boys.
Decisions by Toyota and Honda to enter the small-SUV market in the mid-1990s was a headshot to Suzuki s business, long dependent on the Samurai, the Sidekick, and the Vitara. On the car side, the company was able to hold on a little longer. It wasn t until the mid-2000s when Kia and Hyundai introduced some truly competitive models here. When they did, their cheap cars with long warranties slaughtered what remained of the cheap-import segment.
The new CAFE and greenhouse gas rules disproportionately penalize low-volume manufacturers of physically small vehicles. Porsche can weather the storm (and afford penalties), but Suzuki was at risk. Even with a special exemption called TLAAS, or Temporary Lead-Time Allowance Alternative Standard, Suzuki would have needed to post almost impossible reductions to its cars CO2 emissions—not because they re especially dirty, but because the EPA requires certain degrees of improvement. Suzuki and Porsche joined with Jaguar-Land Rover in voicing concerns to the EPA, but a final rule issued in October showed them only minimal clemency.
Suzuki s retail system was a proper mess. There weren t enough sales to support more dealers opening, but too few dealers to really grow sales. Low-profit-margin products and small sales didn t always attract high-quality dealer managers and sales staff, which in turn probably turned off many customers. For years, dealers and Suzuki corporate alike complained about an antiquated, inefficient system for ordering vehicles in which the dealers had little input; they often didn t have access to the cars they could actually sell. It cost Suzuki dearly.
Are We Going to Lose More Brands in the U.S.?
Very possibly. Mitsubishi is the obvious skater on thin ice, and when asked this week, its U.S. boss was firm in insisting the company will stay. (You didn t expect him to be wishy-washy, did you?) But Mitsubishi is in very serious trouble globally as well as in the States, because like Suzuki, it s experiencing how inhospitable the world car market is for smaller manufacturers.
There may come a time when Toyota pulls the plug on Scion. its own experiment with low-priced entry-level econoboxes repurposed from other markets. In Scion s favor, it s not hugely expensive to run, and Toyota has the cash to spare. Badging the new rear-drive sports car as the Scion FR-S instead of as a Toyota GT 86 in the U.S. is a something of a Hail Mary pass for the Scion brand.
It s almost unthinkable, but Volvo may have to exit the U.S. market at some point as well. Volvo sales here in 2011 were just half of their 2003 level, and the company recently pruned several models from its lineup, including the S40 sedan, the C70 convertible, and the C30 hatchback. Whether Volvo remains largely will depend on the willingness of its owner, Geely, to put up with sluggish sales—and the importance of being in the U.S. to keep appearances as a global luxury brand.
Like all of these companies, Suzuki had some very good cars on offer in American showrooms. The Kizashi and the SX4 may not have been class-leading, but they weren t at the back of the group either—and both were well priced. If you re looking to score a deal, now is a good time for either. Suzuki will continue to honor warranties and supply parts, a promise made stronger by the company s plan to continue car sales in Canada, and to remain in the U.S. selling motorcycles and ATVs.