Minor brands need more than solid products
American Suzuki's recent filing for Chapter 11 bankruptcy and wind-down of its U.S. automotive business offer an opportunity to assess the landscape for the three small Japanese brands in the United States.
They present a striking contrast. Subaru is thriving. Mitsubishi is struggling. Suzuki is leaving.
It's hard enough for Japan's Big Three -- Toyota, Honda and Nissan -- to operate profitably in the punishing strong-yen environment. Japan's small three have little room for error. Let's take a look.
First, the obvious. There's no substitute for attractive products, and Subaru has invested wisely in the heart of the U.S. market: compact and mid-sized cars and compact crossovers. It also has managed to lend an upscale tone to its vehicles, be seen as distinct from rivals and fetch higher stickers.
Recently, Subaru boss Yasuyuki Yoshinaga said he is eyeing a higher U.S. fiscal-year sales target of 400,000 vehicles and will decide by year end how to expand North American output to meet the goal. That's 70,000 units higher than Subaru's forecast for record U.S. sales of 330,000 in 2012. Its U.S. volume is running two years ahead of plan thanks to brisk demand.
Mitsubishi, meanwhile, is hanging on in the United States, and President Osamu Masuko spelled out a comeback plan two weeks ago.
Some strategy suggestions for Mitsubishi:
Do a few things really well. That's the best way to make the most of Mitsubishi's investments.
Build on Mitsubishi's strength, sporty cars.
Invest in dollar-based U.S. production to escape strong-yen penalties.
Chrysler Group has shown that intelligent, edgy advertising can turn around perceptions of tired brands. Mitsubishi should do the same.
Finally, there's the legacy of Suzuki. After the Chapter 11 filing, Suzuki is seeking to cancel the franchise agreements of its 220 U.S. auto dealers.
Suzuki lacked competitive products in the small-car lineup, and the company was ravaged by exchange-rate losses.
Mitsubishi's and Suzuki's products are solid, but nowadays that's not good enough. With the Detroit 3 lavishing engineering dollars on compact cars, the competing vehicles of the minor Japanese brands are overwhelmed. Little about their products stands out.
Moreover, Suzuki and Mitsubishi are intently focused on their strong operations in India and Southeast Asia, respectively. For Subaru, the U.S. market is paramount. That led to significantly different attention to U.S. needs from top management.
If small Japanese brands are to succeed, they must carve out a niche, maintain that investment, escape huge risk and cultivate a loyal following. Anything else isn't viable. Ask Subaru -- or Suzuki.