Suzukis small cars drove firm to bankruptcy in US

Written by New York Times | Updated: Nov 8 2012, 09:10am hrs
Exit from US comes even as company expanding in emerging mkts

For all of Suzukis tough talk about its brush-busting Samurai off-roader, the Japanese automaker never made it big in the United States. Its cars were too small, its safety record iffy and its branding a bit too comical (Suzuki Sidekick, anyone).

So it came as little surprise to most analysts when Suzuki announced late on Monday that it would stop selling automobiles in the United States and put its American unit into Chapter 11 bankruptcy.

The United States was ultimately a tough market to crack, said Kentaro Arita, auto analyst and industry research division manager at Mizuho Corporate Bank. Its exit was a matter of time.

Still, despite Suzukis retreat in North America, the company has made spectacular inroads into emerging markets over the last decade. The low-cost, compact cars sold by Suzukis India unit have the top share in that fast-growing market, and the automaker also has a growing presence in Southeast Asia.

Back home in Japan, Suzuki is a leader in a category of small cars called kei vehicles that enjoy preferential tax treatment by meeting limits on length, width, engine size and horsepower.

One of the companys kei cars, the long-selling Wagon R, is less than 14-feet long, about 5-feet wide and 6-feet high, and its engine size is limited to two-thirds of a liter, or motorcycle-caliber. Last month, almost as many units were sold in Japan as Toyotas Prius hybrid.

Suzukis decision to pull out of the United States, whose market is dominated by larger models, was a sensible step to focus on its strengths, said Koji Endo, an auto industry analyst and managing director at Advanced Research, an equity research firm in Tokyo. The strong yen also made it difficult to profit by making cars in Japan and shipping them to the United States, he said.

The American Suzuki Motor Corporation, the sole distributor of Suzuki vehicles in the United States, filed for Chapter 11 bankruptcy on Monday with $346 million in debt.