Suzuki on Road of Return From a Near-Disaster : Autos: The Japanese company is focusing on enlarging its U.S. dealership network and improving name recognition after the Samurai debacle.
It’s September, and car makers across the land, desperate to excite consumer interest after nearly three years of flagging sales, are gearing up an array of advertising campaigns to tout their 1992 models.
But in the office and warehouse complex that houses the corporate headquarters of American Suzuki Motor Corp. in Brea, the focus is not on 1992, or even on new cars.
The company, which for the past two years has been slowly gaining back some of the ground it lost in the wake of the disastrous Samurai debacle of 1988, hasn’t added any models to its lineup this year.
Suzuki continues to push the four-door Sidekick sports utility vehicle that it introduced in 1990 and this month will launch a new ad campaign for its Swift line of subcompact passenger cars.
New cars--which auto analysts say Suzuki needs if it is to grow significantly in the hypercompetitive U.S. market--won’t start coming until the 1993 model year.
Rapid growth, the stuff of which automotive success stories used to be made, is no longer a concern at American Suzuki. Instead, it hopes to provide the industry with a textbook story of how to bounce back from disaster.
The company’s survival in the U.S. market isn’t an issue, American Suzuki officials and industry analysts say. It has a healthy parent, Suzuki Motor Corp., which with 1990 revenue of $7.4 billion ranks seventh among Japan’s eight major auto makers. Although only about an eighth the size of industry leader Toyota, Suzuki is still a major international auto manufacturer. Nearly 1.1 million Suzuki cars and trucks were sold in 125 countries last year.
Despite its Samurai troubles and a tiny share of the U.S. market (only Daihatsu has a smaller share among Japanese car makers), American Suzuki was one of only a handful of auto companies whose U.S. sales are on the upswing. For the the first half of this year, it posted a 3.5% sales gain despite an overall drop of 15% among all manufacturers and importers.
Kenji Shimizu, chairman and president of American Suzuki, said the U.S. automotive division remains profitable on revenue in fiscal 1991 of $200 million, up $20 million from the year before. In all, American Suzuki projects fiscal 1991 revenue of $500 million, Shimizu said--a 6% annual gain.
The goal for American Suzuki in 1992 is to enlarge its dealership network and improve its name recognition among auto shoppers. Suzuki expects to add 50 new franchises by next March.
Overall, dealers seem to be happy with Suzuki. A number quit the franchise after Consumer Reports magazine said in late 1988 that the Jeep-like Samurai tended to roll over when cornered hard. But Suzuki says the total number of dealers has increased each year since it began in 1985 with 48 franchises in California, Florida and Georgia.
The Suzuki line typically is carried as a second or even third nameplate in a system that enables dealers to use a single showroom and maintenance facility for their prime franchise and one or more smaller lines that don’t compete with the major franchise.
It is a system that works well, said Robert Chaldekas, general manager of Tuttle-Click’s Tustin Dodge/Subaru/Suzuki.
“We’d be dead if it (Suzuki) was a stand-alone franchise,” he said, “but this way it is a nice addition to my lineup. It enables us to offer customers cars that our other lines don’t have, and the Sidekick is the lowest priced four-door sports utility on the market.”
The Suzuki name and the company’s standing in the domestic auto market sustained significant damage from the Consumer Reports review. The federal Highway Transportation Safety Board later dismissed the study and said the Samurai was no more likely to roll over than any other sports utility vehicle. But the government report never got the same publicity.
American Suzuki, which sold 81,349 Samurais in 1987, saw sales of that model plunge to 5,038 units in 1989. The company is projecting sales of 4,308 Samurais in the United States through Dec. 31.
At the time of the Consumer Reports article, the Samurai was American Suzuki’s only domestic vehicle. The company later introduced the Sidekick, a lower, wider, plusher sports utility vehicle, and the Swift passenger car line.
Gary Anderson, marketing director for American Suzuki’s automobile division and the car company’s top U.S.-born official, acknowledged that the company was “hurt badly” by the Consumer Reports review and is still trying to recover the momentum destroyed by the negative report.
“True, our original plan was to grow faster,” admits Shimizu, who became American Suzuki’s chairman and president in a post-Samurai executive shake-up in late 1989 that saw the company’s top three U.S.-born executives resign.
Shortly after launching its U.S. automotive line in 1985, American Suzuki--which began marketing Suzuki motorcycles in this country in 1964--predicted that it would be selling 300,000 cars a year by 1990.
But the loss of consumer confidence combined with an auto buying slump and the current recession to slash Suzuki sales. Current projections call for 22,000 sales this year and a gradual increase to 50,000 sales a year by 1995.
Actually, far more Suzuki-built cars and trucks than that are sold in the United States these days, but most are sold as part of General Motors Corp.’s heavily promoted Geo line.
Under a joint manufacturing agreement with General Motors, Suzuki Motor Corp. builds the Geo Metros and Geo Trackers sold by about 4,000 Chevrolet/Geo dealers in the United States.
And since that part of the Geo line was launched in 1989, nearly 200,000 Suzuki-built Geos have been sold in America, more than three times the number of cars and trucks sold by Suzuki’s 300 dealers in the same 32-month period.
The average Suzuki dealer sells two to three times as many Suzukis as the average Geo dealer, but the vast difference in the size of the two sales networks would appear to put American Suzuki at a distinct disadvantage.
Company officials say it isn’t so, but some dealers say they could do a lot better if Suzuki Motor Corp. wasn’t making vehicles for GM at the jointly owned Canadian Auto Manufacturing Inc. facility in Ingersoll, Ontario.
On the plus side for Suzuki dealers, they can disparage the Geo Metro cars for being offered only with a 55-horsepower, three-cylinder motor. The basic Swift models come with a zippier 70-horsepower, four-cylinder engine. And Suzuki is exclusive distributor for the four-door Swift sedan.
Geo, on the other hand, has exclusive rights to the Metro convertible and four-door Metro hatchback and the two-door hard-top Tracker.
American Suzuki is counting on distinguishing its models from the Geo to establish a market for its products and dealers, Anderson said.
Suzuki Motor Corp., of which General Motors is a 5% owner, has agreed to provide entirely separate designs and models for American Suzuki and Geo from now on, he said. The split began with the Metro convertible and four-door Sidekick in 1990 and will continue with two new Suzuki vehicles to be introduced in 1993 and 1994.
Suzuki officials would describe the new products only as “a new, fun niche vehicle” unique to the U.S. market and a new passenger car, larger and sportier than the Swift.
But one dealer said that in discussions with Suzuki representatives he has been told to expect a convertible that is a hybrid crossing of a truck and a car and a more upscale passenger car about the size of the Ford Escort with far more creature comforts than are provided with the Swift.
The new products will go a long way in helping Suzuki reestablish itself in the United States, industry analysts say.
“Competing against Geo has got to be tough. They need those specific Suzuki products to keep separate from GM,” said Michael Luckey, a New Jersey automotive consultant. “Moving into a slightly larger car will be a real boost for them because it will give customers something more to look for.”
Suzuki officials admit that their growth suffers because the line is limited--a Suzuki buyer typically is a first-time new-car buyer or a buyer looking for economy, and when he or she starts looking to move up a notch or two in price or size, there is nothing on Suzuki lots in America they can move up to, said Ben Moyer, a Japanese auto company analyst with Merrill Lynch Research in Tokyo.
Lack of visibility also hurts. “About the only way somebody buys a Suzuki now is by accident,” said David Hillburn, a Los Angeles automotive researcher and marketing specialist. “They’re at some dealer looking at an Oldsmobile or something, and they trip over the Suzuki and decide they like it.”
Chaldekas, the Tuttle-Click general manager, agreed with that assessment.
“We have to steer a lot of people to them because they don’t know the name,” he said. “The Samurai is a good seller for us, and people come in for that and the four-door Sidekick, but a lot of people don’t know about Suzuki.”
It will take time to cure that problem. American Suzuki’s advertising budget has been slashed in recent years and reportedly is down to about $12 million this year from more than $30 million in 1987.
Company officials won’t divulge information about the advertising budget but say it is not nearly enough to purchase prime-time television slots.
“Besides, our primary buyers are low TV viewers,” Anderson said. “We find that they are younger and more active and are more likely to do a lot of homework before buying, so we focus on magazines that are likely to be read by sports utility buyers. We are not trying to sell 100,000 vehicles, so we don’t need to reach millions of people.”
To that end, Anderson practices what he called “laser marketing,” defining the “psychographics of our buyers” and aiming specific ads into specific marketplaces, usually in magazines and occasionally on cable television.
Suzuki ads play up the kudos bestowed on Suzuki products by various enthusiast magazines such as Road & Track and 4WD Sport Utility Magazine.
“We got more than 400 articles written abut Suzuki cars and trucks in various magazines and papers last year,” Anderson said.
Although the Sidekick has been the focus of Suzuki marketing in the past year, the company is launching a campaign this month that emphasizes its Swift cars, Anderson said.
A second campaign in October will be aimed at increasing corporate name awareness, Anderson said.
One vehicle Suzuki doesn’t promote is the Samurai, and several analysts have said they keep expecting the company to drop it from its U.S. lineup.
But Anderson said the Samurai, now in its seventh year, is valuable because it gives Suzuki dealers the lowest-priced sports utility trucks in the nation.
Some criticize Suzuki for hanging on to the vehicle that almost destroyed the entire U.S. franchise. But other industry analysts praise the company for its determination to make it in the United States.
“It shows they are realists and that they are determined,” said Hillburn, the auto researcher. “They are not pretending that they will be a challenge to Honda next year, but they have a toe in the water and they are learning. . . . Remember, everyone laughed at Toyota when they came over here in 1958.”
