■ Suzuki reveals goal of200,000 U.S. salesannually by 2007, initiates

Suzuki Square dealershipinvestment program.Hundreds of Suzuki dealersinvest millions in upgrades.

■ Suzuki begins selling theVerona mid-sized car inSeptember and the Forenzacompact in November(rebadged Daewoo vehicles).

■ Suzuki joins GM,others to buy assetsof Daewoo Motors

from bankruptcy. Suzuki acquires 14.9 percent of new entity, calledGM Daewoo Auto & Technology Co.

■ Aerio subcompact goes on sale in March.

44 • MARCH 21, 2011

its low, no-haggle price structure, theLinam dealerships began a process offalsely reporting vehicles as sold to [Suzu-ki], often times placing the vehicles in thenames of employees,” Suzuki alleges.

Wells Fargo alleges in its suit againstSuzuki that the company helped coordi-nate a deceptive advertising scheme by twodealerships that sold vehicles with inflatedloan values after advertising low monthlypayments — even no payments — for life.

One of the dealers, Chad Franklin, hasbeen sued by the attorneys general ofKansas and Missouri. According to theMissouri suit, the practice worked like this:

� The dealer ran ads promising customerscould drive a new Suzuki for monthly pay-ments of less than $100 — or in some cas-es, no payments. Often there wasn’t evena down payment.� Customers arranged financing at thedealership. The dealer would secure loanssignificantly larger than the vehicle’sworth, padding the figure with add-onssuch as extended warranties and servicecontracts. The dealer issued customers acheck to cover the first six to 12 monthlypayments.� Customers were told to return to thedealership when the checks ran out so theprocess could start over again with a newvehicle.

But when customers came back, theywere told that the program had ended and

that they would have to assume responsi-bility for the original loan. Those loans fre-quently required monthly payments of$500 or more, for vehicles with a stickerprice of less than $20,000.

Chad Franklin and Paul Gibson, thedealers named in the Wells Fargo suit,filed in federal court in Missouri, operatedfour of Suzuki’s highest-volume stores.

Through the first eight months of 2007,Gibson’s store in Spartanburg, S.C., sold911 new Suzukis, making it the fourth-highest volume store in Suzuki’s network.Gibson’s other store in Gaffney, S.C.,ranked No. 31, selling 412 new Suzukis inthe same time. Franklin’s two Kansas Cityarea stores also were in the top 50 in 2007.

Wells Fargo alleges that both Gibson andFranklin were directed by Suzuki to imple-

ment their advertising scheme and thatSuzuki recommended the same Floridaadvertising agency to the dealers.

The Wells Fargo suit alleges that Suzukiwas aware what was going on at the dealer-ships since factory personnel would meetregularly with dealership executives andmonitor the progress of the campaigns.

Suzuki has denied Wells Fargo’s allega-tions in court. It said any losses incurredby Wells Fargo resulted through thebank’s negligence in approving loans larg-er than the vehicle’s value.

The dealerships named in the suits arenow out of business.

Franklin agreed in 2009 to pay Wells Far-go $4.7 million for breach of contract afterthe bank brought a lawsuit against himcontaining similar allegations.c

continued from Page 43

SUITS

Shrunken lineup, limited ad budget hobble SuzukiRyan Beene

rbeene@crain.com

uzuki faces major hurdles as itworks to regain a foothold in theUnited States.

In an increasingly competitivemarket that offers shoppers unprecedentedvariety and quality, Suzuki now sells just fournameplates — down from seven in its peaksales period five years ago.

It sells the Kizashi sedan, Equator pickup,Grand Vitara SUV and SX4, although the SX4has sedan, hatchback and crossover variants.

David Champion, director of automotivetesting at Consumer Reports, says Suzuki willhave a tough time luring consumers awayfrom competitors: “They’re selling in a verycompetitive marketplace with adequate carsagainst some very good cars with a betterdealership experience.”

And future product prospects are murky. In

December 2009, Volkswagen announced adeal to buy 19.9 percent of Suzuki, and thetwo companies are still figuring out how towork together.

The VW deal, plus unfavorable currencyrates, delayed Suzuki’s plan to bring the sub-compact Swift, which is sold in Europe andAsia, to the United States last year. AmericanSuzuki executives say it’s tooearly to tell whether the re-lationship with VW willlead to new U.S. prod-ucts.

Suzuki says it plansto move from a vol-ume performer to aniche player. SteveYounan, AmericanSuzuki’s director ofproduct planning andmarketing, sees that

niche as offering technology such as all-wheel drive at a lower price than the competi-tion.

As an example he cites the SX4 crossover, afive-door small crossover with all-wheeldrive for $17,744, including shipping.

“Part of our message is bringing the value oftechnology reserved for a higher price point

down to a mass market that every-body can afford,” Younan said.

Sales of the Kizashi mid-sized sedan, which was

billed as the brand’ssavior before itslaunch in late 2009,have been so weakthat Suzuki had torelaunch the carwith an ad cam-paign in January.The campaign has

helped, and Suzuki sold almost 1,300 Kaza-shis through February.

A few years back, Suzuki used to talk aboutan annual U.S. sales goal of 200,000 units. If ithas a goal these days, it’s not sharing it.

Marketing is another issue. The budget hasbeen slashed from more than $100 million in2007 to about $20 million in the first threequarters of 2010, according to Kantar MediaIntelligence, a company that tracks mediaspending.

Mark Johnson, president of dealership con-sulting firm MD Johnson Inc., said Suzukineeds to boost national advertising for its ve-hicles, particularly the Kizashi, if it wants togive its dealers a fighting chance to rebuild.

Said Johnson: “Who is running the compa-ny either needs to decide to spend somemoney and advertise this car or just get out ofthe U.S. — don’t spend any more of yourshareholders’ money.”c

S

2000■ GM doubles stake inSuzuki Motor Corp. to about 20%.

■ XL-7 SUV joins the lineup.

2002 20032004

■ Suzuki reveals goal to increasedealership count to 600 by 2006.

■ 5-door version of the Suzuki Forenza,called the Reno, goes on sale (alsoDaewoo-based).

■ GM cuts stake inSuzuki to 3%.

■ Verona is killedafter the 2006 modelyear.

20062007■ Aerio is killed afterthe 2007 model year.

■ 5-door SX4hatchback debuts inthe fall.

■ GM divests remaining 3%stake in Suzuki.

■ Reno and Forenza are killedafter the 2008 model year. Production of the XL-7 SUVends in the fall.

2008

2006 Verona

2002 Aerio

2000XL-7 SUV

2008 Reno

■ Volkswagen buys 19.9% stake in Suzuki.Deal initiates review to identify product- andtechnology-sharing opportunities.

■ Kizashi mid-sized sedan debuts late inthe year.

2009

The SX4 is one of just four Suzuki nameplates.

S P E C I A L R E P O R T

■ Suzuki Swift subcompact isdelayed until at least 2011.2010

Swiftsubcompactconcept

SUZUKI TIMELINE

20110321-NEWS--0044-NAT-CCI-AN_-- 3/18/2011 3:02 PM Page 1