GREG KEENAN
- AUTO INDUSTRY REPORTER
Suzuki Canada Inc. will test the long-held view that the Canadian operations of an auto maker can’t survive unless there’s also a U.S. unit.
The
Canadian subsidiary of Japan-based Suzuki Motor Corp. said it will
continue to sell vehicles here even though American Suzuki Motor Corp.
is pulling out of the U.S. market and has been granted Chapter 11
bankruptcy protection.
The auto maker’s products – generally in the compact and subcompact
segments – are more appropriate for the Canadian market than the U.S.
market and sales here have been rising in recent months, said Bill
Porter, Suzuki Canada’s senior vice-president of automotive sales and
marketing.
Sales have hit 500 a month nationally in each of the past five months,
Mr. Porter said, showing a turnaround from 2011, when they fell 38 per
cent.
Analysts are skeptical, however, that Suzuki Canada can survive on its own.
“It
will be difficult for Suzuki to maintain Canadian operations with the
U.S. operations in bankruptcy,” said Chris Travell, vice-president of
strategic consulting in the automotive research group of Maritz
Research.
The costs of manufacturing vehicles specifically for
North America are high enough, but become prohibitive when they’re made
for Canada alone because Canada represents just 10 per cent of the North
American market, said Dennis DesRosiers, president of DesRosiers
Automotive Consultants Inc.
Court filings made by American Suzuki
underline the difficulties one of the smallest of the Japanese auto
makers faced when competing in North America during and after the
recession and in coping with the rise in the value of the yen.
“While
many of [Suzuki’s] automotive competitors, including Japanese brands,
produce their main models in North America, all of [Suzuki’s] automotive
models, except Equator, are produced abroad,” the filing said. “As a
result, the manufacturing costs are greater than its competitors’ costs
due to the unfavourable foreign currency exchange rate.”
Suzuki
produced vehicles in Canada for almost 20 years at Cami Automotive Inc.
in Ingersoll, Ont., a joint venture it shared with General Motors Co.
But production of Suzuki vehicles ended in September, 2008, and GM bought out its partner later during the recession.
Shipping
vehicles to North America at the yen’s current level of about 80 to the
U.S. dollar is an unprofitable business, especially when those vehicles
are in small-car segments, which provide less profit than bigger
vehicles to begin with.
In addition, lower sales volumes mean such
fixed costs as marketing, production and development are higher for
Suzuki on every vehicle sold than they are for other companies, the
filing added.
American Suzuki holds just 0.2 per cent of the U.S.
market. Suzuki Canada had a market share of 0.3 per cent in Canada as of
the end of October. Sales for the first 10 months of 2012 rose 1.4 per
cent in Canada to 4,615 from 4,629 a year earlier.
It has the
lowest sales volume in the Canadian market, with the exception of such
luxury brands as Porsche, Land Rover and Jaguar.
Suzuki Canada’s sales hit a recent peak of 13,442 in 2008, but fell to 5,625 last year.
Source;
http://www.theglobeandmail.com/report-on-business/suzuki-to-go-it-alone-in-canada/article4992854/
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