Suzuki Motor Plans To Exit US Car Market

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Suzuki Motor Corporation (TYO:7269) announced Tuesday their plans to exit the U.S. car market after almost three decades, and close its American auto distribution but they did not provide a timetable. The company revealed its U.S. arm, American Suzuki Motor Corporation, will file for Chapter 11 bankruptcy protection in California. Suzuki Motor Corporation (TYO:7269)’s sales in the U.S. will stop after its current inventory runs out, said Ei Mochizuki, a Tokyo-based spokesman.

Suzuki Motor Plans To Exit US Car Market

The Japanese automaker informed that all warranties, parts and service on its products will be honored and continue uninterrupted. American Suzuki only managed to capture a small portion of the market with its small lineup of models. The company cited slow sales and unfavorable exchange rates as the main reason for its exit.

“While the decision to discontinue new automobile sales in the U.S. was difficult to make, today’s actions were inevitable under these circumstances,” the company said.

American Suzuki, best known for its Sidekick SUV, has $346 million in debt, including $173 million owed to the parent company. The distributor has between 500 and 1,000 creditors, according to court documents. The company told it remains “firmly committed” on selling ATVs, motorcycles and outboard marine engines, to help it emerge from bankruptcy.

“These divisions are competitively positioned in their respective markets, allowing for long-term growth as economic conditions improve,” the company said.

For the first 10 months this year, the company sold around 21,000 vehicles in the US market, about 1,000 less than last year. The move will help 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 fierce competition from Hyundai.

American Suzuki, based in Brea, Calif. with 365 employees as of last count, entered the U.S. in 1985 with the Samurai compact sport utility vehicle.  A year later it formed a joint venture with General Motors Canada to produce cars at a factory in Ingersoll, Ontario. Sales of the Samurai plummeted after a Consumer Reports magazine in 1988, claimed that the model may roll over during accident-avoidance tests. The company sued Consumers Union of U.S. Inc, the magazine’s publisher in 1996 and settled the suit in 2004. Suzuki ended its partnership with GM in 2009, following the collapse of Lehman Brothers, and since then has been importing its cars from Japan.

“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 Motor Corporation (TYO:7269) to focus on India and other Asian markets.”

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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