Suzuki Falls Victim to Its Own Samurai

It was just two years ago that American Suzuki Motor Corp., basking in the popularity of its Samurai sports vehicle, predicted that it would be selling a full line of automobiles in America. By 1990, the company--best known for its motorcycles--expected to sell 300,000 cars and sports utility vehicles in this country.

Much has changed for American Suzuki, a subsidiary of Suzuki Motor Co., Ltd., of Japan, since then, and mostly for the worse.

Sales of the Samurai have plummeted from a high of 81,349 in 1987, to 3,399 in the first eight months of this year. And sales of four new models introduced in the last year have been dismal: As of Sept. 1, Suzuki had sold only 21,389 cars and sport utility vehicles.

And as the crucial 1990-model season gets into swing, American Suzuki appears distracted by and self-absorbed with its problems.

Last Monday, the company announced a major management shake-up. Toshiuki Arai was replaced as president of Brea-based American Suzuki and three key members of the company’s American automotive division--sales executives widely credited for the Samurai’s early success--abruptly resigned.

Kenji Shimizu, chairman of American Suzuki since July, assumed the post of president, and Yoshi Fujii, a longtime Suzuki executive, is moving from corporate headquarters in Japan, to the newly created position of executive vice president of American Suzuki’s automotive division.

The moves follow other recent changes at American Suzuki. More than 15% of the Orange County headquarters staff--about 20 workers--were laid off earlier this year and the company is seeking a new advertising agency as the 1990-model selling season begins.

The developments have left many dealers bewildered as they enter the 1990 selling season without a major advertising campaign. And industry analysts are questioning whether the company can recover any time soon.

“The best anyone can do is guess at where this company is headed,” said Jeremy Anwyl, an auto industry consultant in Irvine.

The decline of American Suzuki can be traced to June, 1988, when the publisher of Consumer Reports magazine questioned the safety of the Samurai, claiming that it was more prone to rolling over than other sports utility vehicles.

Suzuki spent millions of dollars on rebates and lobbying in Washington to defend itself against the accusation. The rebates paid off, and Samurai sales leaped to more than 12,000 in August, 1988.

The boom turned to bust the next month, when sales fell to a mere 560, even though Suzuki won vindication in a federal study that concluded that the vehicle was no more susceptible to rolling over than other similar sports trucks. Nevertheless, by March, Suzuki officials said the problem had been put to rest.

But not only has the Samurai failed to recover, a Suzuki spokeswoman now acknowledges that the attacks on the Samurai have tainted the image of Suzuki’s four other vehicles.

The Sidekick--a utility vehicle similar to the Samurai--and three models of the spunky Swift subcompact car have earned praise from reviewers, but sales have been disappointing. One Swift model, the GLX, has sold fewer than 1,000 units and is being dropped from the 1990 line.

“Beyond the Samurai, people don’t have another image of Suzuki, except maybe as a motorcycle maker,” said Anwyl, president of the ad agency USP Automotive Advertising. “When people criticized the Samurai, they might as well have been criticizing the whole Suzuki name.”

Company officials declined to discuss their marketing or sales plans, which for several years were developed largely by Doug Mazza, the vice president who resigned last week along with sales director John Dorsey and national sales manager Larry Messelt.

Industry analysts describe the next several months as a crucial period for American Suzuki to rebuild identity with both consumers and Suzuki’s U.S. dealers.

“Following these resignations, if they don’t come back very strong with a lot of money, some new products and some major personnel announcements, (American Suzuki) might as well just go away,” said Lee Sattley, vice president of operations for Astro Management, which closed its Lakewood Suzuki dealership in August.

Sattley said his company, which still operates large Nissan and Mazda dealerships, decided to shut down its Suzuki operations “to stop the bleeding.” He said he expects other dealers probably will consider doing the same after the resignations last week.

“When you aren’t getting a return on investment, and I don’t imagine many dealers are, you look at your level of confidence in management,” Sattley said. “Now, with basically all the familiar leadership decimated, it’s pretty hard to have confidence.”

Many dealers made fast and hefty profits in 1986 and 1987 on the Samurai, which was introduced in 1985. Now, they get few requests for either the Samurai or the Swift, which holds the honor as the most fuel-efficient import for 1990.

The struggles of Suzuki are similar to those faced by the West German auto maker Audi. In 1986, CBS’s 60 Minutes ran a story that said the Audi 5000 had a tendency to suddenly, and dangerously, accelerate. It wasn’t until July of this year that the federal government cleared Audi in a major report, and concluded that the problem resulted from driver error.

But Audi’s sales and its dealership network have been severely damaged over the last three years. Sales of all models, which peaked at 73,000 cars in 1985, fell to 23,000 last year, and analysts say Audi may never regain its 1985 sales level. For next year, the company said it expects sales of only 30,000 cars.

“With Audi and Suzuki, once these companies were damaged, they can be vindicated and bring out the best product anywhere, but it doesn’t make much difference,” said George Peterson, president of Auto Pacific Group, a consulting firm in Santa Ana.

Suzuki’s “identity crisis,” as one analyst describes it, first took its toll at the dealer level.

When Suzuki officials decided that clearing the Samurai name was the company’s top priority, most of the company’s resources were directed to that effort for several months. As a result, Suzuki’s longtime strategy of maintaining close relationships with dealers started to weaken, said Jesse Snyder, West Coast editor of Automotive News, the trade publication.

Snyder said that when Suzuki introduced the Samurai in 1985, the company spent a great deal of time calling on dealers and listening to their ideas and complaints. This was important for helping Suzuki build dealer loyalty.

Because Suzuki did not have a broad line of cars, the company couldn’t command that dealers sell only Suzukis, and instead signed up dealers whose lots were dominated by Nissans, Toyotas, Plymouths or Fords.

After the Samurai controversy erupted, dealers continued to hang the Suzuki sign on their lots, but few customers were asking about Suzukis, and few salesmen were having much luck pushing the cars.

“Suzuki went to the back of the dealer’s mind, and it hasn’t come back,” Snyder said.

Bart Thomson, who was sales manager of Cormier Suzuki in Lake Forest, described Suzuki as slow to respond to dealers’ needs. Some dealers felt that they weren’t getting the answers they needed to questions about the Samurai’s safety and its future. Cormier, which operates dealerships for several car makers, closed its Suzuki dealership in August when it sold its franchise to Superior Suzuki in Garden Grove.

Some dealers said Suzuki is now trying again to be responsive.

“They’re asking us what we think,” said John Mason, sales manager of Duarte Suzuki. Duarte sold 78 Suzukis in August and was American Suzuki’s top dealer for the month. Suzuki’s 285 dealers sold an average of fewer than 12 cars each in August, a volume considered to be anemic.

As an incentive to its dealers, Suzuki in August agreed to pay half the cost of its dealers’ advertising at least through the end of October. Right now, that advertising makes up most of American Suzuki’s advertising effort.

When Kenji Shimizu relocated from Japan to Orange County in July to take the newly created position of chairman of all of Suzuki’s U.S. businesses, including a struggling motorcycle operation, he said he planned to restore auto sales by increasing the company’s ad budget.

However, when the 1990 Sidekick and the three-door Swift GA were introduced Sept. 25, Suzuki had no major ad campaign to accompany the new models. While other auto makers are spending millions of dollars for sophisticated television and magazine ad campaigns, Suzuki’s only ads will be on billboards.

Suzuki put its advertising account up for review early in the summer and had planned to name a new agency in mid-September. However, presentations from prospective agencies were abruptly canceled when Shimizu was called to Japan for meetings.

One of three finalists unexpectedly dropped out of the review earlier in September, saying its skills would not be a good match with the auto company’s needs. Presentations for the remaining two agencies have been rescheduled for the middle of October, but some analysts said Suzuki may not have an ad campaign for the rest of its fiscal year, which ends March 31.

Suzuki spokeswoman Laura Segall said that Suzuki may have a new campaign before April but that no decision has been made, and she declined to discuss the size of this year’s ad budget. At the height of the Samurai’s popularity, annual ad spending was estimated at $60 million. For fiscal 1989, the amount fell to $30 million, and this year’s total might be less than $20 million, industry observers said.

“You can have the finest cars. But if nobody knows about you, you won’t sell them,” Anwyl said.

Dealers said they can’t do the entire job of promotion for Suzuki.

“It’s the company’s job to let people know what they have,” said Bob Kissick, president of Boardwalk Suzuki in Redwood City. “They have a whole line that they haven’t advertised.”

Even with the best advertising campaign, analysts said Suzuki will have a tough time selling cars, and the company may never again reach the 81,000-unit sales level of 1987 when Suzuki sold only the Samurai.

Analysts said for 1990, Suzuki appears to be de-emphasizing the Samurai, which for the first time is only available with a soft-top. Instead, the Sidekick and Swift are available with more options.

“The Swift is a good car. But there isn’t much unique about it,” said Anwyl, who compared the Swift to the Honda CRX.

A new Swift three-door hatchback with a retail price of $6,400 will make Suzuki more competitive in 1990, analyst Peterson said. An early version of the car was introduced in California in July.

“People are really surprised at what the new Swift has for the price. It’s popular,” said Tony Buttacavoli, general manager of Worthington Suzuki in Huntington Beach.

Snyder of Automotive News said there is still a glut of inexpensive vehicles similar to most Swift models.

And the Swifts are not the cheapest or sportiest of the various cars they compete against, he said.

American Suzuki also increasingly is competing against its parent company. In addition to selling cars through its American subsidiary, Suzuki sells its Sidekick and a version of the Swift to General Motors, which includes them in its GEO line, an increasingly popular line of import cars from several manufacturers.

The Sidekick is sold as the GEO Tracker and the Geo Metro is a Swift, described by American Suzuki as a “stripped-down model.”

“What is the reason for the Swift to be marketed as the Swift?” Anwyl asked rhetorically. “There doesn’t seem to be one.”

SUZUKI’S SAGGING SALES

Date 1989 Model introduced sales Samurai Nov 1985 3,592 Sidekick Nov 1988 13,827 Swift GT Nov 1988 3,001 Swift GLX Dec 1988 838 Swift GA July 1989 161

Suzuki’s total sales Jan-Aug.,1989: 21,419 1988: 57,851 1987*: 81,349 1986*: 47,732 1985*: 2,646 * Samurai only Source: American Suzuki Motor Corp.