Suzuki showing signs of distress scaling back

Struggling Suzuki is shrinking in many ways. Insiders say the company is slashing marketing while sales and the dealer roster dwindle. The many signs of trouble: -- In a market up 13 percent through March, Suzuki was down 2 percent to just 6,561 sales. -- The brand skipped the Detroit and Los Angeles auto shows this year and suspended social media activity on Twitter and Facebook two months ago. -- Steve Younan, the top U.S. product planning and marketing executive, left in January and will not be replaced. No national TV commercials have aired since 2009. -- In January, Suzuki stopped getting customer satisfaction data from J.D. Power and Associates -- data that help track dealer performance. A memo obtained by Automotive News says another vendor will replace Power, but sources say no successor has surfaced. -- The dealer body continues to shrink. The brand shed 32 franchises last year, nearly 12 percent of its total. The number of U.S. Suzuki franchises has dropped every year since 2005. The company's strategy has become "very much focused on short-term profitability," says one source familiar with the company's recent cost-cutting moves who spoke on condition of anonymity. "They're limiting their future in the U.S." Nobody at American Suzuki wants to talk about the troubles and the strategy for battling them. But Suzuki's hard-pressed dealers are feeling the pain. "At one point I really thought they were going to support it, but it was kind of like a downward spiral -- no sales, no money, no advertising," says former dealer Bill Kay, who dropped his Suzuki franchise last summer even though he had a vacant Chrysler dealership in suburban Chicago available for Suzuki. Seiichi Maruyama, former president of Suzuki Canada, was named president of American Suzuki last April. Takashi Iwatsuki, chairman of American Suzuki, arrived in California at the same time to help steer the company after being previously based in Japan. Maruyama and Iwatsuki have been cutting costs wherever possible, sources say. And Suzuki's global parent is wrestling with falling sales in various key markets. "They seem to be more interested in controlling expenses than increasing revenue," said a second source, who also asked not to be identified. The casualties in the United States have been many tools that most automakers use to promote their brand and products. The last Facebook and Twitter presence was Feb. 6. After skipping auto shows in Los Angeles in November and Detroit in January, Suzuki displayed vehicles this year at the Chicago and New York shows, but freshened versions of the SX4 subcompact and Grand Vitara SUV, expected to arrive this year, were not among them. The changes to the vehicles are the first cosmetic updates to Suzuki's meager four-vehicle lineup in more than two years. "The strange thing to me is, even at this bare minimum, when the opportunity is presented to make some news and provide something positive for customers and the dealers, they avoid it," the first source says. Suzuki's newest vehicle, the Kizashi mid-sized sedan, went on sale in late 2009. Its SX4 subcompact has been on the market since 2007 with few updates. The current-generation Grand Vitara SUV has been around since the 2006 model year, and the Equator pickup, essentially a rebadged Nissan Frontier, arrived in November 2008. In 2007, Suzuki's U.S. sales reached 101,884. But last year they dropped to just 26,618. In the memo announcing the termination of the J.D. Power customer satisfaction data, Chris White, Suzuki's sales director, told dealers that Suzuki planned to sign a different vendor within four to six months to provide the scores. But no sign of a successor has surfaced. "A lot of fundamental things that car companies need to track when they're operating, they were just jettisoning for the sake of saving costs," the first source says. Some marketing efforts have continued. Suzuki produced a regional TV commercial for the 2012 Super Bowl to promote the Kizashi that ran in about 20 markets. And a few regional TV spots have followed. Suzuki's troubles and its lack of marketing have led many dealers to call it quits. Former dealer Kay in suburban Chicago says his store sold fewer than 10 new Suzukis in an average month before he bailed out last summer. The few vehicles he did sell had "terrible" profit margins, he says, and the dealership had little service work. Kay, who owns Ford, Chevrolet, Buick-GMC, Honda and Nissan dealerships in Chicago's western suburbs, says poor consumer awareness in his market hindered sales at his dealership. "The problem is that, while it's not a bad product, it's not on anybody's radar to look at," Kay says. Low-volume Suzuki dealerships such as Kay's accounted for most of the Suzuki dealers that closed in 2011, says James Morrell, owner of Advantage Suzuki in Albany, N.Y., and chairman of the Suzuki Dealer Advisory Board. "Suzuki didn't lose any volume because [those] dealers weren't selling any new cars," Morrell says. He says about 150 of Suzuki's remaining 246 dealers still sell five or fewer new cars per month, despite recent efforts to weed out poorly performing dealers. In 2010, for example, Suzuki offered 150 of its worst-performing dealers $50,000 to terminate their franchise. About 50 accepted the offer. Suzuki is not offering buyouts now. But with more than half of its dealers selling five or fewer vehicles in an average month, Suzuki still has many dealers unwilling to focus on Suzuki and adequately promote the brand in their local markets, Morrell says. Many Suzuki dealers use their franchised-dealer status for easier access to financing to support big used-car operations, Morrell says. Indeed, Chicago dealer Kay says used-car sales were the primary focus of his Suzuki store. "It didn't seem like there was any possibility of ever increasing the volume enough to support a stand-alone dealership," Kay says. Despite the struggles of many Suzuki dealers, some have found success with stand-alone Suzuki stores. Greg Sloan, president of Five Star Suzuki in Altoona, Pa., says he has a "very positive" outlook on Suzuki's future U.S. prospects. His dealership, which sells about 60 new vehicles a month, is one of Suzuki's highest-volume U.S. stores. Sloan expects new and updated products within a few years. He says that many of the failed dealers were not committed to the Suzuki brand. Sloan advertises heavily in his local market, something most of the smaller-volume dealers failed to do, he says. "I think that some weak dealers have been weeded out, and I think that there are some dealers that lacked focus in retailing Suzukis by the wayside and we're left with guys who are really focused," Sloan says. "There's nowhere to go but up." Read more: http://www.autoweek.com/article/20120416/CARNEWS/120419880#ixzz1sE4Ku49p