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Isuzu to Leave U.S. Consumer Market
31 Jan 08
After years of struggling sales and elimination of the passenger car line, Isuzu is finally shutting up shop.
Global Insight Perspective | | Significance | Japanese automaker Isuzu has finally announced that it will cease sales of new light-duty vehicles in the United States on 31 January 2009, as it could not secure replacements for the two GM-based vehicles it currently sells beyond that date. | Implications | The move has seemingly been a long time coming, and will cost Isuzu roughly US$37 million in buyouts and related legal costs to discontinue operations. Isuzu has seen sales drop from over 104,000 units in 1999 to just 7,100 units for all of 2007. | Outlook | The demise of the GMT360 SUV and GMT355 pick-ups at General Motors have left Isuzu with little choice but to pack up; in truth, the only real reason the company had not yet done so was that it was less expensive not to. |
Isuzu officially notified its dealer body via conference call yesterday that it will be shutting up shop in the United States, ending over two decades of consumer vehicle sales. The company told the board of the U.S. Isuzu Dealer Advisory Council that it will cease new vehicle sales on 31 January 2009. The company currently offers only two models for sale in the United States, both of them rebadged versions of mainstream General Motors (GM) products. The company's Ascender sports-utility vehicle (SUV) is a rebadged and lightly restyled version of the Chevrolet Trailblazer/GMC Envoy, while the i-Series pick-up is a version of GM's Chevrolet Colorado/GMC Canyon compact pick-up. Isuzu said that uncertainty about GM's future product plans for the platforms on which the Isuzu products are based has led it to the decision to abandon the U.S. market. "It has always been our intention to remain in the U.S. market," Terry Maloney, Isuzu Motor America's CEO, said in a statement. "However, we were unable to secure any commercially viable replacements for these vehicles. Although Isuzu will cease supplying passenger vehicles in North America, it will continue to stand behind its customers and dealers here for years to come." Retail sales of Isuzu vehicles fell to just 7,100 units in 2007, down from a high of 104,000 units eight years prior. The company is offering a very generous buyout package to its remaining dealers, giving all of them the option to remain Isuzu service dealers to take care of customer vehicles in the market. "Isuzu will continue to honor all product warranties and roadside-assistance programs and will maintain its owner relations call center," said Maloney. "Isuzu will be offering all current U.S. dealers the opportunity to continue on as service dealerships for Isuzu." In addition, dealers will reportedly get US$1,000 for every new vehicle they sold on average since 2004 as part of the buyout. Isuzu will also be offering increasingly generous incentives on current inventory in order to clear out models before the cessation of activities. The total tally for Isuzu's buyout package for its dealers is expected to cost the Japanese company nearly US$37 million. Outlook and Implications Isuzu has been facing a downward spiral ever since the 1990s, when it stopped selling passenger cars in the United States. In 1993, Isuzu stopped importing the Stylus, its last passenger car for the United States, and focused solely on SUVs for the United States. At the time, it seemed like a decent idea, as SUVs saw an extraordinary boom throughout the 1990s and early 2000s, and Isuzu kept pace with its Trooper and Axiom models. The Rodeo model was even rebadged as the Honda Passport to give Honda a quick-and-dirty entry into the SUV market. But as with all fads, the popularity of SUVs began to wane, and Isuzu did not have the volume or funds to introduce newly styled vehicles that could compete in the market. It eventually fell to selling only two models, based upon units made by GM, and has been trudging along on life support for most of the last decade. While not officially announced, GM is expected to discontinue the GMT360 SUV upon which the Isuzu Ascender is based by the end of this year. The future of the GMT355 platform has also been under some discussion, with the automaker currently building the vehicles in its Shreveport (Louisiana) plant, but future product plans from GM released as part of the United Auto Workers (UAW) contract late last year do not show a replacement at that plant for the mid-size pick-up models. The Hummer H3 and H3T will continue on in that plant, however, leading to speculation on whether or not GM will replace the mid-size pick-ups with something Mexico or perhaps Brazilian-built, or simply concede the segment. Without these two products being replaced however, Isuzu was finally left with no choice but to spend the money required to placate dealers and pull up stakes. Despite the generous offers for the dealer body however, there are sure to be breach of contract lawsuits like the ones GM faced when it discontinued the Oldsmobile brand franchise. The move out of the U.S. market will reportedly not affect Isuzu's medium-duty truck business, which it intends to continue for the foreseeable future. The company has even purchased land in the United States for another plant, and has said that it will continue to manufacture here. Isuzu was the largest medium-duty truck-maker in the world in 2005, and continues to enjoy considerable market presence in North America and the world. The cessation of operations only covers the company's U.S. consumer retail chains; it ceased sales in Canada in 2003.
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