Volkswagen and Suzuki Aren't Getting Along, Can This Marriage be Saved?
Suzuki, while a high-respected name in the arena of motorcycles and powersports, has had a somewhat less-than-illustrious track record in the U.S. Its decades-long relationship with General Motors resulted in such cars as the Chevy Sprint, Geo Metro, Chevy Tracker, and most recently for the brand, the Suzuki XL-7, a relative to the Chevy Equinox, and the late Saturn VUE and Pontiac Torrent. All except the Equinox and XL-7 have been replaced or discontinued. Unfortunately, it appears bad luck may be following Suzuki into its newest relationship with Volkswagen.
The XL7 was discontinued after just three model years, when GM cancelled the GMT platform and, not coincidentally, sold its minority interest in Suzuki. Plans to build the Suzuki Kizashi in Canada off the GM Epsilon platform were killed, and the small Japanese company's onetime goal of selling 200,000 units per year in the U.S. was forgotten.
Volkswagen AG took up GM's mantle and purchased 19.9 percent of Suzuki. Two years later, all is not well. Suzuki sales for the first half of '11 are up 16 percent, to just 13,402 units. VW CEO Martin Winterkorn has been quoted as saying there are "differences" with Suzuki going forward, and the European giant is disappointed in the tie-up. Suzuki CEO Osamu Suzuki has blogged about frustrations that his company has not been treated equally in the joint venture.
It's not an equal joint venture, of course, in that VW owns one-fifth of Suzuki. The Japanese company brings A-segment platform expertise to VW, as the company that builds kei cars, with 660cc engines, for several of its home market competitors and can claim to be India's largest automaker, thanks to its tie-in with local producer Maruti.
VW, a longtime producer in China and competitor with GM for best-selling status there, hasn't seen any progress in getting into the Indian market, which has the potential to grow even more quickly than China in the coming years. Suzuki has nothing to show for the partnership -- no Volkswagen platforms nor production in North America, where the German company is making a big push with its new Jetta and Chattanooga, Tennessee-produced Passat.
American Suzuki cites problems that have nothing to do with the VW tie-in. It had 500 dealerships here as recently as 2006, and now has about 300. Suzuki is offering incentives to poorly performing dealerships, a spokesman says, to take down signage and return to the used-car market, which has boomed since '08. Many of those dealers are selling one or two Suzukis per month.
Those low-performing dealers are holding onto inventory, while healthier Suzuki dealerships are suffering shortages of some models because of the Japanese earthquake and tsunami, Suzuki says. Its inventory has been running with a high, 3-and-a-half-month supply. Suzuki's dealers are strongest in 20 key cities, mostly in the Northeast and, surprisingly, the Midwest, according to the spokesman.
It won't work for American Suzuki, which has long pushed Japanese management to get the Swift subcompact here as an import. The economical Swift is too tied into currency valuation, so there are no plans for it here. Though the Kizashi is a smallish midsize with a $25,000-ish price, it asks customers to go well upmarket for the brand.
Suzuki's bestseller in the U.S. remains the SX4, by far, outselling the Kizashi 6053 to 3745 for the first half of '11. It sold 2551 Grand Vitaras and 1017 Equators in the same period, plus 35 leftover XL7s and one Forenza/Reno.
The SX4 is part of a joint venture with Fiat, which sells a version called the Sedici in Europe. Agence France Press reported recently that Suzuki is interested in deepening its ties with Fiat, though whether Fiat is interested remains to be seen. Suzuki's lineup marches into 2012 with mild updates of existing models. The Nissan Frontier-based Equator will be built through the '12 model year, and it's Suzuki's option to renew the contract with Nissan when it introduces a new '13 truck, the Suzuki spokesman concludes.