Car dealer Jim Shorkey turns Suzuki's decision to leave U.S. market into sales opportunity
April 21, 2013 4:00 AM
In 2011, Jim Shorkey Jr.'s Suzuki and Kia dealership was named a Best Place to Work by its employees.
Bob Donaldson / Post-Gazette
Jim Shorkey amid a sea of Suzukis at his North Huntingdon dealership.
By Teresa F. Lindeman Pittsburgh Post-Gazette
When Jim Shorkey Jr. heard back in 2000 that General Motors executives decided to pull the plug on the Oldsmobile brand that he and his family had been selling for decades, he cried. "It was one of the saddest days of my life," the longtime dealer recalled.
But when Suzuki executives announced in November that they were going to stop selling cars in the U.S., he didn't shed a tear. Instead, he flew to California to Suzuki's American headquarters to find out how the company was going to handle the pullout. And then he told his staff to start buying Suzukis.
Jim Shorkey Suzuki of Irwin bought cars from dealers in Florida, Colorado and Wisconsin. The dealership along Route 30 bought as many cars as it could from the manufacturer. At one point, the inventory grew to around 800 cars, and space had to be rented to store them all.
"I can't control whether Suzuki is going to stay or go," Mr. Shorkey said. But he could seize the moment, so he did.
When the news broke in November, Shorkey Suzuki was selling about 50 Suzukis a month. Since January, he estimates the dealership has sold an average of 130 a month.
It would be overstating the case to say that car companies come and go with regularity, although the past decade has seen historic brands fade away and manufacturers make significant shifts that have left dealers reeling. Now it is Suzuki's turn.
"It was really only a matter of time before they got out of the U.S. market," said Jeremy Acevedo, an analyst with automotive website Edmunds.com.
Suzuki and its restructuring officer laid out the reasons in the Nov. 5 filing in the U.S. Bankruptcy Court for the Central District of California, Santa Ana division. The company decided its automotive division needed to be restructured, although its motorcycle, ATV and marine motors sales would continue in the U.S.
As of the filing, the company had 220 automotive dealerships in the United States, down from a high of more than 500. Suzuki estimated it had about 0.2 percent of the U.S. market and wasn't growing.
"You're stacked up against some strong competition," said Mr. Acevedo, who noted Suzuki's product line -- heavy on small cars -- has done well in places like India and Japan but struggled to gain traction among Americans used to larger vehicles. In addition, the company didn't advertise as heavily as some of its competition and didn't manage to break through with a distinctive must-have vehicle.
The filing in bankruptcy court noted that recessionary pressures hadn't helped.
It also didn't help that Suzuki had higher costs than competitors, in part because it makes cars abroad and had to deal with transportation as well as currency exchange rates.
The dealership network was struggling, too. "Out of the approximate 220 automotive dealers, only approximately 90 automotive dealers sell significant units of vehicles," the bankruptcy filing said. "Approximately 130 of the automotive dealers sell fewer than five units per month and others may sell as few as one or two units per month."
The company said about 60 percent of its revenue came from the Northeast, where demand for economical four-wheel drive products helped sell Suzukis.
"I think we were one of their better markets," said John Macuga, operations manager at Falconi's Moon Township Automotive.
Mr. Macuga said his dealership had been selling about 20 Suzukis a month when the news broke. "It was a nice little piece of our business," he said, noting that his dealership also sells Mazda, Honda, Hyundai and Ford.
In November, he said, they had between 60 and 70 Suzukis. After the announcement, they didn't try to stock up on any more, unless a customer wanted something specific that they could get from another dealer. Moon Township Automotive sold its last Suzuki at the beginning of the month.
Back in North Huntingdon, Mr. Shorkey estimates he still has about 350 Suzukis on his lot -- and he's good with that.
His strategy goes back to his experience with Oldsmobile. He said he learned there is money to be made when manufacturers shut down, although he didn't immediately feel that way in 2000. "It was the end of the world," Mr. Shorkey said. "It was a dark and gloomy day for me."
His father had begun selling Oldsmobiles in 1960, going in with a partner to buy out the owner of the original dealership in 1974 and renaming the place Courtesy Oldsmobile. Jim Shorkey Jr. later came into the business, and his children have since joined him.
When Oldsmobile was being phased out, the manufacturer offered incentives to help clear out its inventory, and that brought customers in. "We found out that we could sell a few more," Mr. Shorkey said.
The dealership began selling Suzukis in 2003, and Mr. Shorkey took advantage of the company's programs that helped with advertising and paid to grow the operation. "They rewarded you for performance," he said. "That intrigued me."
The first year Mr. Shorkey sold an average of 26 Suzukis a month. "We took that number to over 100 a month," he said, calculating that in the five years between 2005 and 2009 the dealership sold a total of 6,000 Suzukis.
The Suzuki bankruptcy was a blow, but Mr. Shorkey has become philosophical over the years. He said he's learned if he can just take a couple deep breaths, then he can move on to figuring out what the opportunity is.
First, he called his banker. He didn't want the bank to hear the news from someone else and wanted to offer assurances that he'd meet any obligations.
Then he shut down all of his Suzuki advertising because it didn't make sense to run promotions that might not fit the new reality.
He also talked with his executive team, telling them, "We're not going to go around being angry, being mad." Mr. Shorkey stills loves Suzuki and said working with the company has been a great experience.
Once he found out that the automaker planned to honor its warranty programs, planned to offer incentives and would allow dealers to continue as service and parts operations, he gave the order to buy.
He said he told his staff, "We want to start buying Suzukis. I want to buy every Suzuki I possibly can. We want to take advantage of everybody else's panic."
That meant still more discussions with his banker -- and his banker's boss. At roughly $25,000 per car -- the cost differs for the different models -- he estimated the dealership ended up spending about $20 million to get to an inventory of 800 cars. The bank pointed out it was counterintuitive to loan money to buy from a bankrupt company, Mr. Shorkey recalled.
But he believed customers would still buy based on the discounted price, backed up by the warranties and the assurance that they could continue to get service.
The Shorkey dealership will continue as a service and parts location for Suzuki. Mr. Shorkey said the company will pay the dealership $80 an hour for the warranty work, so that's a good business.
Mr. Macuga agreed that Suzuki set up the exit program well, with incentives for dealers and customers. "I loved the fact that they gave you the opportunity to remain as a service department," he said, noting that Moon Township Automotive also will do that.
Meanwhile, Mr. Acevedo, at Edmunds.com, said it helps that Suzuki will continue in business around the world and continue making parts for its cars. That hasn't always been true when brands disappear, and it should give consumers some confidence, he said.
Both Shorkey and Moon Township Automotive are looking for a brand to replace the Suzuki dealership. Both sell other brands -- Shorkey has Kia, Mitsubishi and Chrysler/Dodge/Jeep/Ram operations -- but they'd like to find other franchises.
Mr. Shorkey expects to start running low on Suzukis sometime midsummer and knows it won't be long until the last model is driving off the lot.
"Here we go again," Mr. Shorkey said. "I'm back to where I started from. If the next journey turns out to be half as good as this journey, that's going to be pretty darn good."