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.