Lots of new Suzukis - but problems remain
Automotive News / February 12, 2006 - 6:00 am
American Suzuki has been on a product blitz since the 2004 model year, and several more new or redesigned vehicles are on the way for the rest of the decade.
The company has embarked on a massive project that requires dealerships to be designed with a consistent look.
There is a new captive finance company, and Suzuki dealers are getting close to selling 100,000 vehicles in this country for the first time. U.S. sales in 2005 were 82,101.
But it isn't all gravy. Many dealers are unprofitable, the captive finance company can only provide retail assistance, and Suzuki still is not perceived as a top-tier brand here.
Texas dealer Tim Faith, chairman of the Suzuki Dealer Advisory Board, talked about the issues with Staff Reporter Kathy Jackson.
Are you satisfied with the new product that you're getting?
The Grand Vitara is exceptional. It is the first SUV that we've had that was truly made for North America. It is the most competitive product that we've had.
The Aerio wagon and sedan will go away when the SX4 crossover comes on board next summer. How do dealers feel about that?
The SX4 really is the new Aerio. The new vehicle will be more high-tech, more competitive.
I don't know if it makes sense to have the Aerio. The dealers don't like to stock too many models.
What other hot new products are coming?
The new XL-7 that will be built in Canada. It will be bigger than the current XL-7. It will be our first mid-sized SUV.
Suzuki is known for small cars. With the new XL-7 and Grand Vitara, is Suzuki trying to change its image and go bigger?
For years the dealer council pushed for a minicar, but we had to build bigger vehicles that appeal to the North American market.
We are now getting our first products that are developed for the U.S. market and that had heavy influence by Suzuki executives here. Those vehicles are the Grand Vitara, the SX4 and the XL-7. This will set the stage for Suzuki to get the sales numbers it wants.
So the dealer council was pushing Suzuki for a subcompact car before the other companies got into it?
In Japan we've got small cars with good power, air conditioning, etc., but Suzuki said they did not meet U.S. standards.
There were too many other vehicles in the U.S. pipeline for them to spend the money on a minicar here.
The new Swift would have been the perfect minicar. We may see that come to the U.S. when it is redesigned for the '09 model year.
What is Suzuki's image in the United States?
Our product has always had good quality, but we do not have that reputation.
We also have excellent marine and motorcycle products, just like Honda.
So I don't know why Suzuki is not perceived as a good auto company.
But that is changing. Our residuals are up. At the auction, today, Suzukis are selling over trade value. A few years ago, I could go to the auction and buy Suzukis below trade value all day long.
What has happened to change that?
Advertising has helped bridge that gap. I think our ads today have Super Bowl potential. The commercials are getting attention.
Many more people now know the Suzuki name. They may not know the nameplates, but they know Suzuki.
So the Suzuki name is far more important than individual nameplates?
The most important thing for us now is the name of the company. So when you hear Suzuki, you think of cars. Still today people think of motorcycles first when you say Suzuki. We need them to think autos first.
What is the dealers' top challenge in 2006?
Right now all our captive finance company can do is retail programs. If Suzuki wants to sell huge numbers of vehicles, we need financing for construction, working capital, floorplanning, etc.
Dealers shouldn't have to worry about financing. Our focus should be on selling cars.
What other challenges do you have?
Suzuki dealers need to sell 20 to 30 cars a month. But on average they're selling about 11 monthly. The average dealer cannot survive doing that.
We need to overcome the perception that we do not have good cars and good quality. The Grand Vitara, XL-7 and SX4 will be a litmus test for us.
The Verona, your first mid-sized car, has not sold well. Does that car fit Suzuki's image?
It's a good-looking vehicle, but there was trouble from the time it was launched - electrical and mechanical problems, durability problems. It's a shame.
We will have to overcome them in the next generation. I hope it will come out with a new name.
Do you think the Verona should be killed?
It would bother us if it were killed only because I know we can do it right.
Any big holes in your current lineup?
If you polled every Suzuki dealer, a pickup would be the No. 1 answer.
I don't think you can be a full-line company in the U.S. without a pickup - either a mid-sized or a full-sized. Nissan and Toyota are growing because they have pickups.
There has been lots of talk regarding a Suzuki pickup, but I can't say it's going anywhere.
Are Suzuki dealers happy?
Those who are making money are probably happy, but in the Southern markets there is a lot of turnover. It's hard to be a stand-alone dealer.
The good news is that we have great product, but the bad news is that we do not have enough service work. A sizeable number of dealers are struggling.
The biggest opportunity the last few years has been pushing used cars, but we need to stay focused on new. We have spent the past two years on compact cars, but there is not much money there.
The current Grand Vitara is the first vehicle in a long time where we can make good grosses.
What percent of Suzuki dealers are profitable?
I don't know. My dealership was unprofitable the first nine months of 2005.
But after the Grand Vitara was introduced, (in September) that took us into profitability.
What has been the rate of dealer turnover the past few years?
I don't know, but the franchises have far more value than they did two to three years ago.
What about hybrids?
I think hybrids are a hype. People are buying into what they think is a good situation. There are other cars that have good mileage and safety that cost much less. I would not want Suzuki to put money into a car that would cost $8,000 more than the current vehicle.
Does the factory listen to the dealer advisory board?
Our meetings are very open. Koichi (Suzuki, president of American Suzuki automotive operations) has done a lot to build a better relationship between the dealers the factory, but I can't say the factory is listening to the board on a lot of things.
Like what?
We asked them to do a 100,000-mile warranty, but it took Suzuki a long time to act on it. Had they listened to the board, we probably could have been out with it before Hyundai and Kia, or at least around the same time.
They showed the board a four-door crew cab pickup in 1997. We wanted it, but they never did anything.
We could have been first with a subcompact.
I tell Suzuki if you can get eight dealers in a room and agree on a thing, you should listen to them because they may have it right. Suzuki would be in better shape today if they had taken advice from the board.
Do you think Suzuki makes bad business decisions?
Suzuki runs its operation very conservatively, but it is solid as a rock financially. I realize we can't have a lot of different products because we don't have the budget to market and advertise them. But we still need to sell more cars.
Could Suzuki sell a high-powered sports car in this country?
We've talked to the company about bringing in a Hayabusa edition of some of our cars. Suzuki has a Hayabusa motorcycle that may be the fastest production motorcycle in the world. It is well known. A Hayabusa edition car would have good name recognition.
Do you need more money to advertise?
We would love to see more national advertising, but we have to be realistic.
Far more important than the number of ads right now is having the right kinds of ads. We have to catch people's attention.
Hopefully we can continue with the kinds of commercials we have now and build a theme.
Is the company trying hard enough to woo its motorcycle and ATV customers over to Suzuki vehicles?
We've talked for years about marrying ATV, motorcycle and auto customers.
Last year, for a 90-day period, we extended our auto loyalty program to the ATV and motorcycle customers.
We may do more things like that next year. We need to leverage that customer base.
Suzuki is requiring all of its dealers to adhere to a certain look for its dealerships, called Suzuki Square. How is that going?
A high percentage have signed up. It's a smart thing to do, but the new buildings have not generated the revenue we thought they would as of yet.
Tim Faith
Age: 44
Dealer since: 1992
Dealership: Suzuki Auto Center in Corpus Christi, Texas Average monthly sales: 20 new, 14 used
Quote: "I tell Suzuki if you can get eight dealers in a room and agree on a thing, you should listen to them because they may have it right. Suzuki would be in better shape today if they had taken advice from the board."
Top 3 issues
1. Raise Suzuki's auto image to the level of its motorcycle image
2. Have a captive finance company that can provide capital loans and floorplanning for dealers
3. Double or triple sales per dealership
