On November 5, 2012, American Suzuki Motor Corp. filed for Chapter 11 bankruptcy protection and announced its withdrawal from U.S. auto market. Japan-based parent company Suzuki Motor Corp. intends to buy the U.S. offshoot’s remaining businesses and intends to honor all car warranties and buyback agreements.
According to the Associated Press, Suzuki has $346 million in debts and liabilities to as many as 5,000 creditors.
While Suzuki has stated that the U.S. bankruptcy is unrelated to its parent company, the news of domestic shut-down was quickly followed by a second dramatic announcement.
On November 8th, the CEO of Suzuki’s Gijon, Spain plant announced the motorcycle factory’s closure and the end of European manufacturing. Signs of Suzuki’s downfall have been in place for years and the company’s exit from American auto sales is expected to impact both Suzuki dealerships and competitors.
Why is Suzuki Shutting Down U.S. Auto Sales and Production?
Even after 27 years in the market, Suzuki designs never caught on with American buyers and the company ranked as the second worst mainstream brand. As of October 2012, Suzuki sales were down 4.7% from 2011.
In addition to disappointing sales and a lack of interest in new models, a strong yen raised production and exportation costs.
A representative for Suzuki stated that the company’s exit from the U.S. auto market is part of a restructuring plan. Once the company exits bankruptcy, Suzuki plans to focus on selling motorcycles, all-terrain vehicles and marine outboard engines in the U.S. market.
Possible Effects of Suzuki’s Exit
American Suzuki dealerships made aware of corporate plans to withdrawal from U.S. auto sales Monday when the announcement was made public. Suzuki has stated they will help the transition dealerships from auto sales to parts-and-service operations. On November 8, 2012, Suzuki won approval from a federal court to borrow $45 million to reimburse and shutter its U.S. dealerships.
Edmunds.com predicts that Suzuki’s exit from the U.S. auto industry will benefit Kia and Nissan, the two shop brands most compared to Suzuki by shoppers on their site.
Suzuki’s bankruptcy announcement is predicted to negatively impact the resell value of their vehicles. While the company has taken steps to reimburse its dealerships, the bulk of financial repercussions will fall on its parent company, Suzuki Motor Corp., leaving their future uncertain at best.
Author Gib Goodrich writes for Honda Parts Online, a website that sells genuine Honda replacement parts at wholesale prices.