Suzuki Motor Corporation - Company Profile, Information, Business Description, History, Background Information on Suzuki Motor Corporation

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History of Suzuki Motor Corporation

Suzuki Motor Corporation is Japan's fifth largest automaker, marketing its vehicles in 170 countries around the world. It is best known in the United States and Europe as a manufacturer of small, fuel-efficient automobiles and trucks, as well as powerful motorcycles. In its home market of Japan, however, the company is the leading maker of "midget" cars--a classification almost unknown outside Japan. These tiny subcompact automobiles are popular because of the tremendous overcrowding in Japanese cities, where since the early 1990s a larger car cannot be purchased legally until the owner can show proof that he or she has a parking spot. Such midget cars are smaller than the Yugo or Ford's Fiesta model and are comparable to the British Mini. In the market for two-wheeled vehicles, approximately 80 percent of Suzuki's domestic output is mopeds, or motor-driven bicycles. The company also makes marine outboard motors, generators, water pumps, and even motorized wheelchairs. In addition, through its network of foreign assembly plants, Suzuki is adept at turning out millions of car parts.

Suzuki's growth has been predicated on its distinctive domestic and international strategies. Domestically, the company owes its success to its high-quality engines, around which it designs a wide variety of vehicles for special or emerging niche markets. Internationally, Suzuki has traditionally targeted developing countries with growing populations, including Cambodia, India, China, Egypt, Hungary, and Pakistan. Suzuki's policy in these markets is to find a local partner to sell simple, more affordable vehicles, taking advantage of the small margins on huge volumes of sales. In the U.S. market, Suzuki's strategy is an extension of its domestic plan. While Ford Motor Company, General Motors Corporation (GM), Toyota Motor Corporation, and Chrysler Corporation battle for leadership in mass markets, Suzuki excels in the quirky niches between jeep and utility vehicle and between compact and subcompact.

Early 20th-Century Founding

Suzuki Motor Corporation was founded by Michio Suzuki in 1909 as a manufacturer of weaving machines. From its base in Hamamatsu, the Suzuki Loom Works, as it was then known, supplied weaving equipment to hundreds of small fabrics manufacturers in and between Tokyo, Yokohama, and Nagoya. At the time, textile manufacturing was one of Japan's biggest industries. It provided a growing and stable market for the Suzuki enterprise. In 1920 Michio Suzuki took his company public and named the new firm Suzuki Loom Manufacturing Company.

Suzuki continued to manufacture weaving machines exclusively throughout the 1920s and until the mid-1930s. At that time a militarist clique gained control of the government and began a massive mobilization program called the "quasi-war economy." Companies throughout the country were asked to begin planning for a conversion to armaments manufacturing. Suzuki was an especially attractive supplier because it was in the business of equipping other factories. In addition, the company was located far away from major industrial centers that would become primary bombing targets.

By 1937 Suzuki had begun production of a variety of war-related materials, which may have included vehicle parts, gun assemblies, and armor. For its part in Japan's World War II effort, Suzuki, like thousands of other companies, was requisitioned for war production and probably had no intention of becoming a manufacturer of military implements. Nevertheless, the company continued to manufacture weaving machines for the duration of the war. Fortunately, the Suzuki factory and the city of Hamamatsu escaped the ravages of U.S. bombing campaigns. The company was capable of resuming production after the war, but the economy and supply networks were in ruins.

New Directions after World War II

Suzuki reestablished production of textile manufacturing equipment soon after World War II. Japan, however, was so impoverished that there was little demand for new woven products. As a result, few companies could afford to purchase new looms. By 1947 the pace of investment continued to be slow, prompting Suzuki to make a major change in its business. That year the company moved to a new headquarters building and, relying on the manufacturing experience it had gained during the war, began design work on motorized vehicles. The prospects were favorable; Japan was a nation of nearly 100 million people, nearly all of whom lacked access to basic transportation.

The heart of the new Suzuki product line was a small 36cc engine that could be used to motorize bicycles. Production of the moped, called the Power Free, began in 1952, prompting Suzuki to abandon weaving equipment entirely. In conjunction with the introduction of the new product line, the company changed its name to the Suzuki Motor Company in 1954, the same year it introduced its first line of motorcycles. The following year, Suzuki graduated from two-wheeled vehicles to a light passenger sedan called the Suzulight, powered by a 360cc engine. In the process, Suzuki gained valuable experience in developing larger internal combustion engines, vehicle frames, gear systems, and steering mechanisms. In 1958, Suzuki developed an improved moped, named the Suzumoped. The following year it began production of a revolutionary delivery van, much smaller than conventional delivery trucks then in use and more appropriately suited to many motorized businesses.

Suzuki banked on the fact that, as its customers' operations grew, so would their needs. Therefore, it would be pointless for the company to squander hard-won loyalty by neglecting to offer its customers a properly diverse product line. Having gained an important foothold in various sectors of the Japanese vehicle market, Suzuki cleverly used these beachheads for further expansion. The popular delivery van of 1959 convinced the company to develop a light truck, called the Suzulight Carry FB, in 1961.

The single event that gained Suzuki its greatest international recognition, however, occurred the following year, when a Suzuki motorcycle won the 50cc-class Isle of Man race. It was the first of many victories for Suzuki motorcycles, victories that firmly established the previously unknown company model as a world leader. By 1970, demand for more powerful motorcycles would prompt Suzuki to develop its first line of four-stroke engine motorcycles. This preserved Suzuki's position of leadership in the market.

Exporting and Diversifying: 1960s-70s

Suzuki had difficulty expanding into domestic automobile markets that were dominated by Toyota, Honda, and Nissan. As a result, it was unable to develop a more sophisticated product line. In its search for growth, Suzuki turned instead to export markets that were in the same economic condition Japan had been in 10 or 15 years earlier. The most promising market was Thailand, a country that historically had close ties with Japan. In 1967 Suzuki established a factory in Thailand to assemble a variety of vehicles whose parts were made in Japan. By providing local employment and inviting Thai investment in the venture, Suzuki skirted import restrictions that locked out other manufacturers. Later, Suzuki duplicated the export development formula in Indonesia and the Philippines.

Still unable to reach sales goals for domestic vehicles, however, Suzuki began a diversification campaign. The company's small engines were fitted to electrical generators, yielding an entirely new line of portable power sources. In addition, the company dabbled in housing, an initially successful but short-lived venture.

The 1973 Organization of Petroleum Exporting Countries (OPEC) oil embargo drastically changed the automobile market. Faced with skyrocketing fuel prices, consumers showed interest in more efficient cars. But while Suzuki's little cars and trucks sipped gasoline, they were underpowered when compared to competing models from Japan's big three. The company's domestic auto sales slid further during a 1974 recession resulting from the oil crisis. That year, total sales of minicars--Suzuki's prime automobile segment--fell by more than 65 percent from 1970.

Suzuki began a major export campaign soon afterward, commencing full motorcycle production in Thailand, Indonesia, and Taiwan. In addition, it sent automobiles to the United States for the first time. The product was a bit unusual in the U.S. market, where the roads were dominated by enormous, heavy cars. Suzukis were introduced in the United States in small numbers but were refreshingly fuel efficient, capable of using one-third to one-half as much gasoline as some American models. Suzuki, however, entered the U.S. market well behind Toyota, Honda, Nissan, and even Mazda and Subaru. Furthermore, by 1978, fuel prices had fallen, and demand for Suzuki's "economy cars" was evaporating. Oil prices would shoot up again briefly in 1979, following the Iranian Revolution, but by then many of Suzuki's most promising markets had enacted tough laws restricting imports from Japan.

1970s-80s: Forging Partnerships

Returning to the development strategy it had begun in Thailand in 1967, Suzuki negotiated a number of foreign investment deals, agreeing to locate production facilities in several countries in return for access to their markets. In 1982 the company established a Pakistani production firm called PACO and a similar operation in India called Maruti Udyog, Ltd. Suzuki also established a partnership in Spain with Land Rover known as Land Rover Santana S.A. Two years later Suzuki set up new marketing operations in New Zealand and France.

In the United States, Suzuki's largest market outside Japan, the company signed a series of marketing and production contracts with General Motors and rival Isuzu Motors in 1981. As part of the deal, GM purchased a 5.2 percent interest in Suzuki. The companies planned to share production facilities and handle marketing of each other's products. In 1983 Suzuki began production of its Swift subcompact, selling the cars through GM as the Chevy Sprint and later as the Geo Metro. Another result of Suzuki's arrangements with GM was the creation of a joint subsidiary in Canada, called CAMI Automotive, in 1986. This plant went into production in 1989, manufacturing Sprints, Metros, and Suzuki Sidekicks (also marketed as Geo Trackers).

While Suzuki's joint venture with GM was off to a good start, Suzuki had considerably more trouble of its own. Shortly after establishing a U.S. subsidiary at Brea, California, in 1986, the company was accused by Consumer Reports of producing an unsafe vehicle, the Samurai. Specifically, the magazine noted that the Samurai's high center of gravity could cause it to flip over while negotiating turns even at low speeds. Suzuki launched its own investigation and took remedial measures, but the damage had already been done. Worse for Suzuki, the company's entire U.S. executive team resigned--a gesture of atonement that was misinterpreted as an abandonment of the company's commitment to the product and to the U.S. market in general.

Domestically, Suzuki developed several new models during the 1980s, including the Cultus subcompact in 1983 and the four-wheel drive Escudo in 1988. Also in 1988, Suzuki agreed to handle sales of Peugot automobiles in Japan. The following year, the company rolled out the Cultus Esteem, which shared the same 1600cc engine as the Escudo. Also shoring up revenues were motorcycle sales, which were recovering by 1990, following a decline that had begun in 1982.

With the Samurai debacle behind it, Suzuki initiated a subtle campaign to reestablish the vehicle's promising U.S. franchise. The high-riding Samurai was popular with younger adults who favored a more rugged jeep-like buggy that was impervious to off-road obstacles. Above all, it was fun to drive and distinctive in appearance.

Suzuki also continued its push at globalization, opening a plant in Great Britain in 1986 that turned out 15,000 microvans annually. The company established a partnership with the Egyptian company Modern Motors SAE, called Suzuki Egypt SAE, to build compact cars and the Super Carry truck and van line in that country. Suzuki licensed manufacture of its Swift/Forsa model through Colmotores SA in Columbia. The Pakistani venture was also expanded to include automobile manufacture under a new company, Pak Suzuki Motor Company, Ltd. In April 1991 Suzuki established a joint venture with C. Itoh, the start-up Hungarian auto manufacturer Autokonzern RT, and the International Finance Corporation. The enterprise, called Magyar Suzuki Corporation, began production of the Suzuki Swift in Hungary the following year. In addition to putting up $230 million in capital for the new company, Suzuki flew each of its Hungarian workers to Japan for training in its production methods.

Also in 1991 Suzuki Motor Company adopted the more international name Suzuki Motor Corporation. During this time, the company suffered reverses in its largest enterprise, midget cars with engines under 550cc. This was due to two factors: new laws that extended parking restrictions to cars of that class and a worsening recession in Japan. Suzuki's losses were partially offset by an increase in motorcycle sales, but because revenues from auto manufacturing were nearly five times greater than motorcycle sales, the company's overall growth rate slowed substantially.

A promising area for Suzuki was its place under the corporate umbrella of General Motors's international ventures. Through teaming agreements, Suzuki was designated GM's de facto small car division, developing automobiles for the American company under the Geo nameplate. Elsewhere in Suzuki's U.S. business, sales of the Samurai recovered to 20,000 in 1992, and the company projected revenues of the Samurai would exceed 50,000 in three years. In 1995 the company introduced the mini sport utility vehicle the X90. With engines, suspensions, and four-wheel drive options similar to the two-door Sidekick, the X90 combined off-road capabilities with carlike, commuter-friendly features.

Exploiting Niche Markets in the 1990s

Globally, Suzuki continued to seek out countries with emerging markets and large populations. Its joint ventures with the governments of Pakistan, Hungary, Egypt, and Columbia had been low-risk and cost-effective means of expansion. The company stepped up that same successful strategy in the early to mid-1990s in India and China. Having begun a joint venture with the Indian government-controlled Maruti Udyog in 1982, Suzuki increased its equity hold to 50 percent in 1992 and raised that company's capacity to 200,000 units in 1994. By 1998 the Suzuki-Maruti venture held 80 percent of the Indian automobile market. In China, Suzuki built on a licensing agreement with the government in 1993 to become the first Japanese company to invest in a Chinese automobile manufacturing venture.

In 1994 Suzuki introduced two successful products to the Japanese market: the Alto van, whose $5,000 price tag made it the least expensive automobile in the country, and the Wagon R miniwagon. However, also during this time Suzuki's problems with the Samurai returned to haunt the company. In 1995 the U.S. courts awarded $90 million to a woman who was paralyzed as the result of a Samurai roll-over accident. Suzuki responded by suing the Consumers Union, the publisher of Consumer Reports, in 1996. The company claimed that the Consumers Union had purposely manipulated the test in 1988 to ensure that the Samurai failed the short-course maneuvering portion.

As Suzuki approached the 21st century, it remained primarily a niche manufacturer. The company derived about 70 percent of its income from sales of automobiles, including the Cervo, Alto, and Swift car models; the Carry van; and the sport utility vehicles Samurai and the Escudo, which was sold in the United States as the Sidekick. In 1998 the company introduced a compact sport utility vehicle called the Jimny Wide. Hoping to sell 2,000 of the 1,300cc-powered vehicle a month in Japan, Suzuki planned to begin exporting the vehicle in mid-1998.

Moreover, in the late 1990s, Suzuki remained Japan's leading minicar manufacturer, a position it had held for almost 25 years. Motorcycles, which ranged from 50cc scooters to 1100cc touring bikes, composed approximately 15 percent of Suzuki's business. In addition, outboard motors contributed three percent of Suzuki Motor Corporation sales.

The company sold approximately two million vehicles in 1997 and had plans for considerable expansion by the year 2000. Over the next three years, Suzuki hoped to raise the number of vehicles sold per year to 2.5 million. Of that, 100,000 was targeted for the United States. By 2004 the company planned to hold five percent of the world's motor vehicle market, although the economic turmoil in Asia in 1997 and 1998 cast a pall over these plans. Although Suzuki sold its vehicles in markets around the world and could count on India, Pakistan, and China as major outlets for its goods, the company relied on Japan and emerging markets in southeast Asia for a significant portion of its sales. How the company would make up for plummeting demand in these countries and how they would deal with the instability of the Japanese yen remained to be seen.

Principal Subsidiaries: American Suzuki Motor Corp.; Suzuki Canada, Inc.; Suzuki Motor de Columbia SA; Suzuki Australia Pty., Ltd.; Suzuki New Zealand Ltd.; Suzuki Motor GmbH Deutschland; Suzuki France S.A.; Suzuki Motor Espana, S.A.; Suzuki Philippines, Inc.; Suzuki Italia S.p.A.; Suzuki Transport and Packaging Co., Ltd.; Suzuki Real Estate Co., Ltd.; Suzuki Parts Manufacturing Co., Ltd.; Suzuki Marina Hamanako Co., Ltd.; Suzuki Oil Co., Ltd.; Suzuki Special Products Manufacturing Co., Ltd.

Additional Details

Further Reference

Bedard, Patrick, "The Next Big Thing," Car and Driver, May 1995, pp. 52-56."Detroit Auto Show Notebook," United Press International, January 8, 1998.Eisenstodt, Gale, "A 4 Billion People Market," Forbes, September 27, 1993, pp. 48-49.Miller, Karen Lowry, "Why the Road Less Traveled Suits Suzuki," Business Week, June 15, 1992, p. 126E."Suzuki Launches New Sport-Utility Model in Japan," Reuters, January 7, 1998.

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