Suzuki Borrows $45 Million to Close Dealers; Mitsubishi Promises to Stay in U.S.

Suzuki is dead and Mitsubishi is alive--at least, that's what the news of the past 48 hours suggests. Within that time frame, American Suzuki won a court ruling that will allow it to borrow $45 million to shutter dealers, and Mitsubishi Motors CEO Osamu Masuko promised his company isn't next up in the U.S.-market list of casualties.

Late yesterday, American Suzuki Motor Corporation won approval to borrow about $45 million to reimburse and shutter automotive dealerships. The company is hoping to keep the closing process quick with franchisees by offering them cash payments to franchisees who voluntarily leave the contracts, reported Automotive News.

Something tells us this shouldn't be too difficult, however: AN also reports that fully two-thirds of Suzuki dealers sell five or fewer units a month. As of October 1, there were 6000 unsold units sitting on Suzuki lots, representing an 82-day supply; in contrast, Ford dealers had 6100 units of just the Ford Flex to sell, a 54-day supply. The question of Suzuki's demise has already been answered, and the only question that remains is how quickly it will happen. What appears likely for those two-thirds of low-selling dealers is…nothing: those Suzuki dealers are probably part of consortiums that will merely take down the S-branded signs, and shuffle staff around the organizations.

While the process should be fairly easy for most dealers, it's going to hurt the distributor the most. Suzuki intends to pay dealers half of what they're owed if the dealers invalidate their contracts by the end of this month; seeing as the total debt is estimated at $50 million, at least half of that $45 million loan approved by California courts is going directly to dealers (who will make up the difference through the Chapter 11 bankruptcy process). Then again, there's a much easier way for Suzuki and dealers to make money--by selling their units.

With that said, many people wondered if Suzuki's death in the U.S. could cause a chain reaction, pushing another low-volume Japanese manufacturer out of business – we’re looking at you, Mitsubishi Motors. Mitsubishi's CEO has his answer, however, and it's a resounding "no."

Automotive News reports that Mitsubishi President Osamu Masuko has "no intention whatsoever of withdrawing [Mitsubishi] from the U.S. market." That's in light of Mitsubishi's industry leading unsold inventory numbers--there's a 131-day supply of Mitsubishi cars and trucks sitting on dealer lots, easily double the industry-standard of 60 days--and little in the way of new products coming in the near future. Dealers will have to contend and wait for a new Outlander--with a plug-in hybrid model following shortly thereafter--and the specter of a new Mirage minicar.

Source: Automotive News 12 (subscription needed)

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