Rick Suzuki: Fall on Sword Justified?
April 30, 2008

By Michelle Krebs

It was puzzling and surprising when Rick Suzuki announced in late March that he would   step down as chairman of American Suzuki due to the company’s poor performance.

After all, American Suzuki sales haven’t appeared that bad on the surface. In fact, Suzuki sales have nearly doubled since 2003. In March this year, Suzuki sold 10,510 vehicles, its highest amount since June 2007 in an extremely tough sales environment when the industry as a whole and most automakers reported a sales decline.

But a closer look by Edmunds.com shows those sales came at a cost that led to the operating losses to which Rick Suzuki referred in his March letter to employees.

Suzuki’s Total Cost of Incentives (TCI), Edmunds.com’s proprietary formula for calculating incentives, was a whopping $2,651 per vehicle. That’s on vehicles with an average transaction price of just $21,000.

And the costly incentives didn’t do much to reduce Suzuki’s inventories. In March, despite higher sales, Suzuki had the highest days to turn of all makes, according to Edmunds.com. It took 127 days from the time a Suzuki vehicle arrived in the showroom to it being driven off the lot by its buyer.

In a March letter to employees, the 60-year-old Rick Suzuki wrote that he would step down “to bear responsibility” for the automaker’s poor sales and earnings. No timeframe was given for his departure. Chairman of American Suzuki since 1998, he is the grandson of Suzuki Motor Corp. founder Michio Suzuki.

In 2003, when Suzuki sold 58,438 vehicles, the automaker publicized its five-year plan to sell 200,000 cars a year in addition to 300,000 motorcycles and ATVs. Rick Suzuki’s letter to employees noted that while car sales increased every year since 2003, they did not do so fast enough and failed to meet the target. American Suzuki closed 2007 with sales of just over 100,000 vehicles, only the second time it topped 100,000 units (the first time coming in 2006).

Suzuki sales have not met their goal, in part, because the automaker’s high-volume XL7   have lagged projections due to high gasoline prices that have soured consumers on SUVs who have turned toward more fuel-efficient small cars and crossovers. The automaker had expected to sell 50,000 XL7 models a year but is running at about half that amount.

As a result, American Suzuki is operating at a loss, and now is in cost-cutting mode -- reducing its workforce, implementing cost-saving measures and revamping its distribution system to get the right vehicles to dealers faster.

This year, Suzuki winds down the Forenza sedan and Reno hatchback. Nissan provides   Suzuki with a version of the Frontier truck in the fall; it will be called the Equator. A new midsize sedan reportedly is due next year with the tiny, fuel-sipping Swift making its return around 2010.

Still, as noble as his resignation may be, Rick Suzuki appears to be bearing more of the responsibility than he should in this competitive market. After all, when was the last time a chairman or CEO resigned versus being thrown out on his ear because of the company's poor performance?

Photos by Suzuki
1 - Rick Suzuki
2 - Suzuki Equator (aka Nissan Frontier)

Jessica Caldwell, Edmunds.com’s manager of Pricing and Industry Analysis, provided the analysis for this report.

Posted by Michelle Krebs at 4:20 AM under Analysis , Business , Companies , Personalities | Comments (1) | digg this | Seed Newsvine