American Suzuki Files For Chapter 11 Bankruptcy, Cites $346M In Liabilities

by Tara Arick on November 7, 2012 · 0 comments

in Bankruptcy

- From LexisNexis® Mealey’s™ Daily Legal News.

American Suzuki Motor Corp., the distribution arm for Suzuki Motors in the United States, on Nov. 5 filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Central District of California, citing $ 346 million in liabilities and only $ 233 million in assets (In Re: American Suzuki Motor Corporation, No. 12-22808, Chapter 11, C.D. Calif. Bkcy.).

Chief Restructuring Officer M. Freddie Reiss filed a first-day declaration supporting American Suzuki’s Chapter 11 petition on grounds that the company needed to reorganize in response to its ongoing loss of business.

Business Decline 

American Suzuki is the sole distributor in the continental United States of Suzuki automobiles, motorcycles, all-terrain vehicles and marine outboard engines, known collectively as the Suzuki Products.

The company filed for Chapter bankruptcy to restructure its automotive division, which has recently faced, and will continue to face, numerous adverse business issues. For example, Reiss says American Suzuki is experiencing declining sales volume and market share; unfavorable foreign currency exchange rates for products manufactured outside the United States; the high cost associated with growing and maintaining an automotive distribution system in the continental United States; and the problem of having a limited number of models in its lineup that are being offered to consumers in an already highly competitive automotive market.

Reiss says that after the global subprime recession in 2008, American Suzuki’s auto sales in the United States declined and that with those declining sales, American Suzuki faced “serious financial and operational challenges.”

Costs ‘Disproportionately High’

Moreover, American Suzuki is facing disproportionally high and increasing compliance costs associated with stringent state and federal automotive regulatory requirements unique to the continental U.S. market and litigation costs related to pending lawsuits and potential future actions.

As part of the automotive division restructuring, American Suzuki will discontinue new automotive sales after its existing automotive inventory is sold, Reiss says.

He added that as of the petition date, American Suzuki owed $ 32 million on what is called a revolving loan and the amount outstanding for inventory financing under its loan agreement was $ 120 million. Moreover, American Suzuki has $ 9.43 million in inventory loans, which it owes to Suzuki Motor Corp., which is not secured by any other loan agreement, Reiss adds.

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