This paper examines American Suzuki Motor Company's response to a severe dealer inventory crisis during the 2008–2009 economic recession. With dealers averaging more than 100 days of unsold 2008 model inventory, the company implemented several cost-effective programs: leveraging GMAC government financing for dealer floorplanning, withholding 2009 models to ease channel pressure, offering cash incentives on existing stock, and cross-branding with its successful motorcycle division. The paper analyzes these distribution decisions in the context of broader auto industry practices and concludes with recommendations for accessory bundling, consumer leasing partnerships, Japanese financing support, and comparative advertising targeting rival economy brands such as Kia.
In the Automotive News article "Dealers Like Suzuki's Plan to Cut Inventory Glut" (Jackson), a bleak picture is painted of the inventory positions of American Suzuki Motor Company's dealers throughout the country. With an average of more than a 100-day supply of 2008 models sitting unsold, the Japanese automaker was compelled to create innovative, low-cost programs to move inventory. Gary Akin, Vice President of Sales for Suzuki, stated that the goal of these programs was to reduce dealer inventory to a 30-day supply and to bring the company's own inventory down to a 60-day supply.
With the government infusion of cash into GMAC Financing, more dealers were able to put floorplanning programs in place to finance their operations. This support was critically needed within American Suzuki's distribution channels, as dealers had been without a financing program since October. Finally, Sales VP Gary Akin announced that he was holding back the 2009 models and financing the inventories of the less popular 2008 models, so that dealers would only need to carry the most popular and fastest-selling 2008 vehicles. American Suzuki's dealers welcomed the news and the support.
American Suzuki was making insightful decisions in the midst of one of the worst economic downturns in four decades. Given that the auto industry bore the brunt of the recession as consumer spending contracted at a rapid rate, it is no surprise to see more than 100 days' worth of vehicle inventories accumulating in distribution channels. American Suzuki's decision to interlink its very successful motorcycle division with its auto division through extensive branding campaigns may have actually spared the company from an even larger inventory problem in its channels.
Like all automakers at the time, American Suzuki was also offering cash incentives — or "spiffs," as the article notes (Jackson) — on all models, including the 2007 best-selling Grand Vitara SUV. The critical role of government-backed GMAC financing is also reflected in the article: without that assistance, American Suzuki would have had no financing to offer its dealers.
Another particularly insightful decision was to partner with dealers and work alongside them to relieve financial and pricing pressures by not pushing 2009 models into their lots. Compare this approach to that of other automakers who required their dealers to absorb the bulk of inventory costs — GM being a prominent example — and it becomes clear that Suzuki's strategy would pay dividends in long-term channel loyalty. Ford, similarly, continually pressured its dealers to accept new models even when they carried significant existing inventory. By contrast, American Suzuki's restraint in this regard stood to solidify the loyalty of its channel partners.
"Bundling, leasing, financing, and advertising strategies"
"Cited automotive news source"
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