Suzuki, Mitsubishi urged to quit as sales slump

Suzuki Motor Corp and Mitsubishi Motors Corp, suffering from plunging US sales and excess North American plant capacity, may have to quit the market after a quarter century.

Suzuki, Japan’s fourth-largest carmaker, reported a 78 per cent drop in unit sales in June, pushing its first-half decline to 60 per cent, the market’s worst.

Mitsubishi is down 51 per cent this year, and is stuck in a slump that began in 2003.

Both carmakers “should withdraw from the US,” said Yuuki Sakurai, chief executive of Tokyo-based Fukoku Capital Management Inc, which oversees about $10 billion in Tokyo.

“It’s time for them to decide whether they pay a high price to continue business there or stop the bleeding.” Recession, joblessness and weak consumer confidence pushed US auto sales to the lowest since 1976, bringing bankruptcies for General Motors Corp and Chrysler LLC and a record loss at Toyota Motor Corp.

 

Truckmaker Isuzu Motors Ltd, which halted US consumer sales in January, is the only Japanese brand less familiar to carbuyers than Suzuki or Mitsubishi, according to industry analyst Alexander Edwards.

“Both are struggling with getting customers to initially even consider them,” said Edwards, head of auto research for San Diego-based Strategic Vision Inc.

Currently, they rank in the “bottom five” of 35 brands Strategic Vision tracks, he said. To reverse that, both need to boost their US marketing budgets, Edwards said.

“We’re not talking about a one-time investment, but a consistent, sustained effort,” he said. “If they’re looking for a quick fix, continuing in the market will be tough.”

“We will never give up the US market,” Mitsubishi Motors President Osamu Masuko said on July 9 in Tokyo. “The US will return to being the world’s biggest market.”

Masuko also said the company isn’t pursuing alliances with other carmakers in the US or planning to use its Illinois factory to supply vehicles to other brands.

Mitsubishi Motors had a ¥23.6 billion fiscal loss in North America last year, equal to 43 per cent of its global loss of ¥54.9 billion. Suzuki had a ¥24.1 billion ($258 million) loss in North America in the fiscal year that ended in March, the only unprofitable region for the Hamamatsu Japan- based company, which earned ¥27.4 billion worldwide.

Suzuki sold 84,865 vehicles in the US last year, a 17 per cent drop. Mitsubishi sold 97,257 vehicles, down 25 per cent.

Toyota, the world’s largest automaker, has about 30 times the US sales volume of either Suzuki or Mitsubishi, retailing 770,449 vehicles this year. While Toyota’s US sales are down 38 per cent this year, its 16 per cent market share dwarfs the respective 0.6 per cent for each company.

Honda Motor Co, Japan’s second-biggest automaker, has 11 per cent US market share and 20 times the sales volume of its two smaller rivals. The Tokyo-based company’s have fallen 34 per cent this year.

Suzuki rose 1.7 per cent to ¥2,125 at 3 pm close of Tokyo trading. The shares have gained 73 per cent this year. Mitsubishi Motors rose 0.6 per cent to ¥164 in Tokyo and is up 34 per cent this year.

Both companies also have North American auto-assembly plants that are under-utilized. Cami Automotive Inc, the Ingersoll, Ontario, factory Suzuki operates as a joint venture with GM, stopped making Suzuki’s XL7 sport-utility vehicle this year. Suzuki hasn’t announced a new model to be built there.

GM makes Chevrolet Equinox and Pontiac Torrent SUVs at Cami, and on June 26 said it will make the GMC Terrain crossover at the Canadian plant. Cami’s output is down 78 per cent this year through July 4, according to trade publication Automotive News.

Production at Mitsubishi’s Normal, Illinois, plant, has plunged 83 per cent so far this year, according to Automotive News data.

Tokyo-based Mitsubishi is now using just 10 per cent of the plant’s capacity and may shut it down this year, said CSM Worldwide analyst Masatoshi Nishimoto.

Mitsubishi “doesn’t make cars that are hot-sellers in the US,” said Nishimoto, who is based in Tokyo.

Fumio Nishizaki, a Tokyo-based spokesman for Mitsubishi Motors, said the company isn’t planning to close the Illinois plant. Mitsubishi hasn’t announced replacements or additions to its current lineup of midsize and compact cars and SUVs in more than a year. The company hopes to sell the i-MiEV electric car in the US by 2010, after introducing the model in Japan this month.

The car travels 160 kilometers (100 miles) when its lithium-ion batteries are fully charged, and is priced at ¥4.6 million, or about $49,000.

CSM forecasts global demand for electric cars won’t exceed 100,000 units until 2014, suggesting US sales of a limited range mini-vehicle such as i-MiEV may be small.

Mitsubishi in March shut its US design studio to cut costs. In January, the company said the poor-selling Raider pickup truck, supplied by Chrysler, would be discontinued.

Suzuki, Japan’s second-largest minicar makers, said in March 2008 it would add a mid-size sedan designed for the US by 2010, aiming to expand sales of more lucrative models. The car would compete with Toyota’s Camry and Honda’s Accord, the segment’s usual top-sellers.

The so-called Kizashi model is still in development, said Hideki Taguchi, a company spokesman. “Because of the current market situation, we’re reviewing the plan as to where and when to sell,” he said.

Adding such a model in the US is a challenge, given Suzuki’s specialty in smaller vehicles, said Yasuaki Iwamoto, an auto analyst at Okasan Securities Co in Tokyo.

“It makes more sense for Suzuki to put its limited resources into small cars,” said Iwamoto. “Forget about America.”