Automaker Files for Chapter 11 Bankruptcy

Suzuki announced on Tuesday that it was no longer going to sell cars in the U.S. due to dwindling auto sales. Today it announced it would file for Chapter 11 bankruptcy protection.

The Japanese automaker will no longer sell cars under the name American Suzuki, however the company will continue selling boats, ATV’s and motorcycles in the U.S.

Auto industry analysts said profits had dropped due to lower sales and because of the yen being so strong, which made manufacturing and transporting the vehicles between Japan and the U.S. too costly. The U.S. market favors larger vehicles and the compact car of Suzuki at lower costs have not been as successful in the U.S. like they have in other markets such as Southeast Asia and India. Those two markets are the fastest growing for the Japanese automaker.

Suzuki’s bankruptcy was prompted by debts in the amount of $346 million. A company statement reported a number of challenges including sales volume being too low, a small number of models and the yen exchange rate differential.

Suzuki noted there was disproportionately high and rising costs associated with the very stringent federal and state regulatory requirements that were unique to the U.S., which added to the brand’s demise. The company said it would plan a smoothly structured transition from automobile sales to only service and parts operations.

Over 200 Suzuki dealerships will be directly affected in the U.S. because of the bankruptcy. Suzuki will be excused from all contractual obligations with dealerships due to the bankruptcy. Many dealerships were offered buyouts from Suzuki during the past couple of years because of the company struggling. Over 50 dealerships in the U.S. accepted the company’s buyout offer during 2010.

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