NEW YORK — Isuzu Motors America Inc. President J. Terry Maloney came to the New York auto show in April with something to prove.
Isuzu's problems in the U.S. and globally have caused the media to begin ringing the death knell — prompting widespread belief that the auto maker soon will depart the U.S.
But Maloney says Isuzu isn't leaving — a point he emphasizes with future-product detail stretching to the '06 model year.
Examples of articles wrongly forecasting the U.S. demise of Volkswagen AG and Hyundai Motor Co. Ltd. and a photo of the world's most famous journalistic blunder — “Dewey Beats Truman” — bolster his point that the press has gotten it wrong before.
The speculation, however, has been fueled by Isuzu's prolonged downslide, evident in its disastrous financials, waning market share and painful workforce and budget cuts.
The most critical blow came when General Motors Corp., which had owned 49% of Isuzu, decided to cut its losses by retiring its entire stake. The auto maker then spent $80 million for a new 12% share.
In the deal, Isuzu lost some of its best U.S. assets — the successful Duramax, Circle L 1.7L and V-6 diesel engine technologies, which GM now completely owns.
To reduce overhead, Isuzu late last year bailed out of the 49% stake in its only U.S. manufacturing facility, Subaru-Isuzu Automotive Inc. in Lafayette, IN. Isuzu's Axiom and Rodeo still are assembled there under contract with Fuji Heavy Industries Ltd. (Subaru), which bought Isuzu's share for $1. But that arrangement ends after the '04 model year, when both vehicles are dropped from Isuzu's lineup, Maloney tells Ward's.
Isuzu's U.S. sales have been dismal: just 57,135 units in 2002, a 32% drop from year-prior. And this year, Maloney says he expects to see sales of only 36,000 units — a forecast 37% drop.
This, de-spite the benefit of first-year availability of Ascender, the GM-built 7-passenger SUV that rebadges the GMC Envoy XL and Chevrolet TrailBlazer EXT.
Ascender has stumbled, with sales of 1,209 units through April. But Maloney is asking GM to increase output of Ascenders, despite a 155 days' supply of the SUV. In Canada, the situation is worse: Only five units sold in April for a grand total of 12 year-to-date, a 95.6% plunge from like-2002.
Maloney downplays the severity of the U.S. problems. He claims Isuzu is profitable so far this year, thanks to a business model he created enabling Isuzu to turn a profit by selling fewer than 40,000 vehicles annually.
Leveraging its diesel expertise, Isuzu has achieved a first for the mainstream U.S. market: a direct-injection V-6 gasoline engine. The technology — now only available here in the BMW 760Li and Rolls-Royce Phantom — will be standard on Axiom and optional on Rodeo beginning in September. Direct injection on Isuzu's 3.5L V-6 makes for 10% better fuel economy and an additional 20 hp.
In first-quarter 2004, Isuzu will bring out a 5-passenger Ascender (badged from the short-wheelbase TrailBlazer/Envoy). For '06, an all-new, Isuzu-based 7-passenger SUV will bow, with the direct-injection V-6.
Isuzu's problems in the U.S. may be seen as almost inevitable. The SUV specialist once had a viable niche in the light-truck market. Now, virtually every auto maker has a light truck, while Isuzu has lost share — and the attention of potential buyers.
Maloney says the marketing problem translated into a pricing problem, as well. Prices were creeping up, yet Isuzu was giving money back to customers through higher incentives. “It was a disconnect between the value of the brand and what the consumers were perceiving,” Maloney says.
The goal now is to lower prices and keep a lid on incentives — a strategy Maloney figures will yield the same transaction prices but draw more customers. The strategy will be coupled with a stronger marketing push — all part of the turnaround plan.
Lincoln Merrihew, automotive leader for market analyst Compete Inc., says the new pricing strategy may not be enough.
“The situation they have to be careful of is assuming a linear transferring of high sticker, plus incentives, to just a lower sticker price, especially if consumers are just expecting rebates anyway,” he says. “There's the risk that consumers won't do all the math but just will expect incentives.”
Don't expect radical new designs as Isuzu attempts to reinvent itself. “We will stick to our SUV heritage,” Maloney says.
And he hopes, in the end, to again prove the media wrong.
