Suzuki says N.America a priority to boost profits
By Chang-Ran Kim, Asia auto correspondent - Reuters
Updated: 10:13 p.m. PT June 4, 2006
HAMAMATSU, Japan - Japanese compact car maker Suzuki Motor Corp. needs to step up its game in North America and rely less on Asia to boost its relatively low profit margins, the head of its overseas marketing division said.
"When you look around, almost all Japanese car makers make most of their money in North America," Senior Managing Director Shinzo Nakanishi told Reuters.
"Unfortunately for us, we rely too heavily on Asia where many countries are either politically unstable or whose economic foundations are weak," he said in a recent interview at Suzuki's headquarters in Hamamatsu, southwest of Tokyo.
With a product line-up of mostly tiny cars, Suzuki is a marginal player in the United States, where SUVs, minivans, pickups and other light trucks account for more than half of demand.
In 2005, Suzuki sold just 82,100 vehicles in the United States for a 0.5 percent share -- more than half of that in two cars built by General Motors Corp.'s South Korean unit, GM Daewoo Automotive and Technology, under the Suzuki badge.
"We need to raise the priority level for North America," Nakanishi said, citing the company's goal of achieving an overall operating profit margin of 5 percent by 2010, versus 4.1 percent in the business year ended March 31.
Japan's top three auto makers, Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. all had operating margins of at least 8 percent.
While Suzuki is taking steps in that direction, analysts -- and Nakanishi -- are sceptical.
The maker of the Swift compact car has set a goal of selling 250,000 vehicles in North America in the business year ending March 31, 2010 -- up 155 percent from the 98,000 sold last year.
For sales to even reach 150,000 units, Nakanishi said, Suzuki would need a new passenger car developed in-house with an engine of around 2,000cc -- a prospect he conceded was dim.
"We've been talking about a car like this for 30 years now. "We don't have the means right now, and I've given up," he said, denying a report in the Nihon Keizai business daily on Friday that plans were underway for the launch of a new mid-sized car in North America as early as in 2009.
Suzuki is due to roll out a revamped XL7 and the all-new SX4 crossovers later this year, and said on Friday it would eventually procure a small pickup truck from Nissan Motor Co. for the region.
But Nakanishi said Suzuki, whose brand is associated with small cars, could not expect high volumes from SUV-type models, meaning it needed to beef up its sedan line-up.
Analysts agreed Suzuki's North American sales target was ambitious.
"It's a pretty steep target," said Christopher Richter, a Tokyo-based auto analyst at CLSA Asia-Pacific Markets.
"Lately their biggest-selling car is coming from GM-Daewoo. It's going to require some pretty impressive growth rate."
To be sure, analysts are optimistic about Suzuki's broader growth prospects given its big lead in emerging markets like India: For this business year, Suzuki has forecast sales of around 990,000 vehicles in Asia, excluding Japan, up 11 percent from 2005/06.
But Nakanishi, who also heads Suzuki's India operations, said the auto maker would inevitably see its market share of over 50 percent in India drop as bigger competitors prepare a head-on attack.
"I expect the competition to bring models into the below-1.2-litre segment, which makes up half the market," he said.
"We'll need to add more products to fend them off, but even then it won't be possible to defend our current market share."
