One of the problems with social media is how misinformation can spread like wildfire once a single rumor is ignited. On November 5, 2012, American Suzuki Motor Corp announced it would be filing Chapter 11 bankruptcy proceedings in order to reorganize its operations as it prepares to discontinue sales of automobiles in the U.S. Social media networks immediately erupted in cries of “Suzuki going under” and “no more Gixxers/Busas”. My email inbox was soon groaning under the load of dozens of messages asking if the rumor was true.
Even though many social media posts had links to news stories that spelled out the facts, most people don’t bother to check out the links (and even if they did, few of them would read beyond the first paragraph). And the stigma attached to any company filing Chapter 11 bankruptcy proceedings led many to simply assume and opine that Suzuki’s days were numbered.
So let’s run through the actual facts. First, the name on the bankruptcy court filings is American Suzuki Motor Corp, not the parent Suzuki Motor Corp in Japan. ASMC is a wholly owned subsidiary of SMC Japan, and just distributes the products produced by the parent company.
...there are thousands of businesses that have successfully taken this path on the way to financial solvency. "
The announcement by ASMC states that it plans to “discontinue automobile sales in the continental U.S.” In fact, the title of the announcement states that the “restructuring and realignment” is being done to “focus on [its] Motorcycle/ATV and Marine divisions.”
Chapter 11 bankruptcy is not the same as Chapter 7, where the company ceases business and it is parceled out for sale in order to get money back to creditors. Chapter 11 allows the company to restructure and receive financing on favorable terms in order to continue business in the hopes that it can emerge from the situation and eventually pay off its debts. And there are thousands of businesses that have successfully taken this path on the way to financial solvency.
Supporting a national automobile dealership network in the U.S. is a hundred times more expensive than any motorcycle distributorship operation, with comparatively massive shipping, parts, manpower, logistics, and financing operations. And when the economy caved in, ASMC’s automobile division suffered a major drop in sales that soon made it become a serious financial drag on the company.
But don’t think that Suzuki’s auto division worldwide is struggling. Despite the setback in North America, Suzuki remains the number one seller of automobiles in India’s huge and still exploding market, as well as many Southeast Asian countries. Even back in Japan, Suzuki is the leader in the small car class known as kei, which enjoy tax breaks because of the category’s regulations on width, length, engine size and horsepower. And while worldwide motorcycle sales are down from the previous year, SMC Japan still reported a $527 million operating profit in the latest fiscal report. The corporate parent company may not be swimming in liquid assets (actually, the number of automobile companies that are in robust financial health can be counted on one hand), but it’s far from the brink of fiscal disintegration.
If anything, the Chapter 11 filing is good news for Suzuki motorcycle enthusiasts in the U.S. Instead of being forced to prop up its automobile division — something that would be tough to do even if the motorcycle/ATV/marine sections were having banner sales years — ASMC can now focus on its core assets that were the company’s strengths from the beginning. While we surely won’t see a return to the free-spending years that saw Suzuki sponsoring numerous races across the U.S. anytime soon, it’s a fair bet that the company’s presence will at least be visible on a greater scale around the motorcycling world.
Make no mistake, American Suzuki was forced to take a drastic step in order to get itself on better financial footing to meet the challenges ahead of it in a still struggling market economy. And it’s certainly not out of the woods by any means. But to paraphrase an oft-used quote, the rumors of its demise have been greatly exaggerated.