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Should Suzuki and Mitsubishi Just Go Away?

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2009 Suzuki SX4 Man FWD

2009 Suzuki SX4 Man FWD

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You'd have to go back decades to find a tougher auto market than the current one, and the massive sales decline is global.

But thus far, no automakers have exited the tough US market, where sales are running at a level of 10 million vehicles--versus almost 17 million just three years ago. Now a Japanese financier wants that to change.

Yesterday in Japan, the chief executive of Fukoku Capital Management Inc., Yuuki Sakurai, suggested that both Suzuki and Mitsubishi should withdraw from the US market.

Sales slumps

Both companies have seen their sales plummet by more than half. Mitsubishi's volume is down 51 percent, and Suzuki's a stunning 60 percent.

According to Automotive News, Suzuki's June sales decline of 78-percent was the worst in the industry. The trade publication attributed the losses to a leaner product line.

Suzuki has discontinued its Reno and Forenza small cars, and it is hampered by short supplies of its XL-7 crossover. The plant in Ontario, Canada, where the XL-7 is made has been idle for months during changeover to the new 2010 Chevrolet Equinox and 2010 GMC Terrain models also built there.

To pump up its sales, the company recently offered a free $270 gas card on top of existing rebates on its 2009 Suzuki SX4 small hatchback and sedan.

As for Mitsubishi, the sales decline began way back in 2003. That was the year when its program of offering low-interest loans to buyers with marginal credit proved disastrously costly, despite the significant boost to short-term sales it had generated.

Huge numbers of those buyers ended up defaulting, leaving Mitsubishi to with hundreds of millions of dollars of losses and lots full of repossessed cars worth only a fraction of the outstanding loan balances. Its sales have never entirely recovered.

Buyers face tough credit

Today, Mitsubishi and Suzuki each sell mostly smaller, inexpensive subcompact and compact cars. And entry-level buyers in those segments have been hit particularly hard by the credit crunch, experiencing great difficulty in getting affordable auto loans.

Nonetheless, in the last 20 years, the only make that has exited the US market has been Isuzu, which stopped selling passenger cars several years ago after a successful run in the 1980s.

But it continued to sell a dwindling number of pickup trucks until last year, so that most of its dealers ended up closing through attrition. That saved Isuzu from a costly program of having to buy out their franchises.

Several European makers--Alfa Romeo, Fiat, Peugeot, Renault, and Sterling--gave up on US sales during the 1980s. The US market is widely considered the most competitive in the world, with comparatively low car prices and very high customer expectations.

If either Suzuki or Mitsubishi does leave, however, it won't be easy. They will have to wind down dealer networks they have built up over two decades, and arrange for continuing parts and service for their remaining owners.

At least one executive is standing fast. “We will never give up the U.S. market,” said Osamu Masuko, president of Mitsubishi Motors, yesterday in Japan.

2009 Mitsubishi Lancer

2009 Mitsubishi Lancer

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[Bloomberg, Automotive News]

 
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Comments (4)
  1. If only they could import their micro car class of vehicles, then they would have a market mostly to themselves as no traditional domestic nor most of the European car companies sell platforms in this size and weight category. BTW, how the author of this piece could leave out Daihatsu, but mention Sterling, who sold cars for roughly HALF the time Daihatsu did, seems to be an oversight.

  2. It would be a sad sad day to have Mitsubishi go. As far as Japanese manufacturers go, Honda and Toyota products are BOORRINGG... Mazda has completely ruined their styling with their production interpretation of the "nagare" design theme. Mitsubishi has excellent product in the Lancer and Outlander (both Japanese built) and great product in the works. Cash is just tight for Mitsubishi which makes it hard for them to bring new marketing and product. If they can get their Galant replacement mid-size vehicle ZT concept out, I definitely see them coming back.

  3. It would be sad to see Mitsubishi leave the US. It has had a number of quality issues but does at least have some exciting vehicles. Suzuki on the other hand should stick with with Motorcycles here unless it comes up with a complete new product line and not one that is badge engineering at its worst ala the Equator pickup. Love em or hate them, I'm not sure how anyone can compare GM to either of these companies.

  4. Both Suzuki and Mitsubishi offer better value (i.e. what you get for what you pay) than most of the companies they compete with in the Compact/Midsize SUV/CUV categories. Suzuki has excellent competence when it comes to building engines and 4WD systems, but lacks access to a global parts bin which is why they team up with companies like GM. Mitsubishi has better competence with product design, and has some interesting proprietory engineering themselves. If you ask me, they should merge or at least form a joint venture with cross-patents to reduce costs and each focus on different segments.
    My two cents.

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