Per the U.S. Bankruptcy Court in Santa Ana, Calif. American Suzuki Motor Corp. will be allowed to continue offering 0% financing to car buyers. The promotion could help unload the Japanese automaker’s remaining inventories here in the States.
On Nov. 5, Suzuki announced that the Brea, Calif.-based ASMC would file for Chapter 11 bankruptcy protection, and the company would concentrate on its stronger sectors of motorcycles, ATVs, and watercrafts. Court records indicated the company had $233 million in assets vs. $346 million in liabilities.
Ally Financial, Suzuki’s primary lender, provides wholesale and retail financing for the automaker under the private label American Suzuki Financial Services. The court needed to grant permission for American Suzuki to continue paying Ally for subvented loans. During the month of November, Suzuki is offering 0% financing for 72 months for 2012 models; 2013 models are offered 0% financing for 48 months.
ASMC stated in a filing that it has 220 U.S. dealers, but just 90, mostly in the Northeast region, moved “significant” volumes. According to the filing, 130 of those dealers sell less than five units per month, while others sold as few as one or two cars monthly. As of Nov. 1, Suzuki had roughly 5,500 units in its inventory, representing a 71-day supply, said the Automotive News Data Center.
American Suzuki has had no interruption in dealers accessing credit from ASFS following the bankruptcy filing, Ally spokeswoman Sue Mallino said.
There have always been several factors discussed when talking about what affects residual values . I believe that the level of front end rebates and incentives are the “result of” the greatest determining factor that influences a vehicles residual value. Marcie hit on the most important economic fundamental that influences this whole residual discussion, “matching supply with demand”. At the center of the incentive philosophy is a very simple and accurate notion. The fundamental reason for an incentive is to increase demand so that sales will reach the supply. If the supply was too high to begin with, this imbalance follows the model through its economic life and continues to create downward pressure on the ongoing value of the unit. The most effective way to enhance residual value is to be more accurate in matching initial supply and demand. The more accurate this balance, the less need for front end incentives. The more accurate this balance the better the ongoing residual value is enhanced. I strongly believe that most, if not all, the OEM’s now realize that volume takes a back set to profitability. Core profitabilty is grounded in the proper balance of profit per unit at a volume that matches supply with demand. Case in point–look at Honda bottom line versus the rest of the industry (including Toyota) over the last 4 or 5 years. They truly understand this concept better than everyone else. I believe you will start to see this same trending with others and one of the first is Ford. My 2 cents worth