Texas Suzuki Review

Houston, Texas, June 2007

Suzuki began as a silk loom company. After a bad year for textile markets in the early 1950's, the company experimented first with motorized bicycles, advancing to motorcycles and small automobiles.

It wasn't until the 1986 that Suzuki began to make inroads in the US auto import market.

Coming late to the car business, Suzuki needed to build a reputation. This was begun by building fast motorcycles, and today's automotive ads still hearken back to the sporty bike image. The vehicles advertised have little in common with the company's bikes.

Doubling US sales since 1998, Suzuki has built a beachhead (7% market share) in auto retailing, but their boxy styling and Bavarian-inspired font logo "S" do little to stand out from the economy car crowd.

When GM owned 21% of Suzuki, a Suzuki stock sale by a cash strapped GM was inevitable.

Small-vehicle specialist Suzuki is a strong performer on own, with a $10B market capitalization and rising share price (OTC-SZKMF). Suzuki has manufacturing plants in 14 countries and distributors in 119 countries.

The question, now that General Motors has cut its holdings, is whether the little company has financial resources to compete in the new automotive age. Hybrids, hydrogen, and electronics all call for deep pockets.

Can core technological competence be assembled when a majority of US sales are Korean-made Daewoos rebadged as Suzukis? (Suzuki is a 10% shareholder in the GM-Daewoo joint venture).

Quality at Suzuki

Suzuki's quality and reliability scores have typically been in the bottom 20 percent.

In the J.D. Power and Associates 2006 Customer Retention Study, Suzikis ranked a suprising 15th out of 37 makes. 43.9% of those surveyed returned to purchase another vehicle.

American Suzuki headquarters is located in Brea, California. GM and Suzuki share an assembly plant in Ingersoll, Ontario.

Consumer Reports (CR) has no Suzukis "recommended."

I wouldn't expect to see any since the lawsuits over the 1988 Suzuki Samurai rollover tests.

It always amazes me when companies take the bait and sue CR, this is a no-win deal. Even when they win it's a public relations disaster.

The real weakness here is poor fuel economy, the basic reason for buying smaller cars. The lack of 6-speed transmissions produces high freeway speed engine RPMs, wasting fuel. Cars this small should be EPA highway rated 39 mpg, not 28.

Suzukis have poor resale value. Automotive Lease Guide awards its lowest 1-star rating to Aerio, Forenza, and Reno. Grand Vitara, SX4, and XL7 earn 3 stars.

Suzukis in the Product Pipeline

Suzuki's US products include the Aerio, Forenza, Reno, SX-4, XL-7, and the Grand Vitara

The Verona mid-sized sedan has been discontinued.

The newest and most appealing product, the SX-4, is co-developed with Fiat, which markets it as the Sedici.

Dealer Network

For 2006, American Suzuki sold more than 100,000 vehicles in the United States.

While this represents considerable sales growth, it may not be enough to support a critical mass of dedicated dealerships. As Suzuki struggles for brand recognition and product awareness, not enough of its 530-some dealers are exclusively committed to the marque.

Mostly sold in dealerships combined with other brands, Suzukis may not generate sufficient dealer profits to stand-alone. The company asserts that 30% of dealers are solo, and profitable.

Sales growth has been consistent, outperforming Isuzu and Mitsubishi, but is concentrated in the new products, SL-7 and Aerio/SX-4.

SX-4 is reported to sell well without significant incentives.

Conclusions

Suzuki offers low priced autos, but their poor fuel economy and high depreciation yield higher true-cost-to-own than competing makes.

The transferable, zero-deductible, 100k mile warranty makes them attractive in the used car market, once initial depreciation has been absorbed by first owners.