IRVINE, Calif. -

With American Suzuki bankruptcy proceedings in full swing and moves made on what to do about relationships with franchised dealers, Kelley Blue Book took a look at what the proceedings might mean for used Suzuki vehicle values.

KBB said two brands that recently left the U.S. market provide a solid comparison on what to expect — the two badges being Isuzu and Saab.

“Now that Suzuki has announced that it will be leaving the U.S. automotive marketplace and filing for bankruptcy, existing owners may be nervous about the resale value of their SX4, Kizashi or Grand Vitara,” Alec Gutierrez, senior market analyst for automotive insights, said in a message to Auto Remarketing on Thursday.

“When brands are discontinued, especially those that aren’t the subsidiary of a much larger nameplate (i.e. Saturn under General Motors), used-car values usually drop in excess of typical expected depreciation,” Gutierrez continued.

“Consumers tend to shy away from owning orphaned vehicles due to the uncertainty surrounding the availability of replacement parts, warranty coverage, and the perception of driving a vehicle produced by a failed brand.

“To get a better sense of what we can expect, we can look to the two most recent brands to cease production in the United States that were not under a large parent company — Isuzu in 2008 and Saab just last year,” he went on to say.

When Isuzu pulled out of the U.S. automotive marketplace in 2008, Gutierrez said the nameplate was in a similar position that Suzuki is in today. Isuzu’s only products at the time were the I-series pickup and Ascender sport utility, which were based on GM’s Colorado and Trailblazer, respectively.

“When Isuzu went under, we didn’t see much of a change in resale values,” Gutierrez said. “Since Isuzu’s entire limited portfolio was based on existing GM nameplates, there was little concern of a lack of replacement parts, which helped to keep values of used Isuzu vehicles steady.”

When Saab left about year ago, KBB pointed out the development produced a significantly different reaction from dealers and consumers. In just one year since filing bankruptcy, analysts indicated the private party value of the 2010 Saab 9-3 has dropped more than 50 percent, far surpassing the 11- to 14-percent drop of the 2010 Cadillac CTS and BMW 3-Series, models they said are two close competitors.

“Saab values tanked due to the lack of a commitment for warranty coverage on Saab models sold in the last few years, and the fear surrounding a lack of replacement parts further down the road,” Gutierrez said.

The two varying results left KBB pondering a question: Whether values of used Suzuki models will drop like Saab or hold steady like Isuzu.

Kelley Blue Book believes that Suzuki values will avoid a significant correction since the company will continue to honor warranty claims and produce replacement parts.

“Suzuki remains a large player in Japan and should have no trouble producing parts to keep used Suzuki vehicles running in the United States,” Gutierrez said. “Further limiting the company’s risk on the downside is the fact that Suzuki already is one of the most affordable brands available for sale in the secondary market and quite frankly, there isn’t much room for them to drop much further.”

KBB noted the average 2011 model-year Suzuki has a private-party value that is worth approximately 59.4 percent of original MSRP. This compares to an average retention value of 73 percent for Hyundai and 72 percent for Toyota and Honda.

Although Kelley Blue Book does not expect values of used Suzuki vehicles to suddenly fall off a cliff, they will drop at least marginally in the weeks and months ahead.

“Consumers tend to shy away from vehicles that are no longer supported by a strong manufacturer presence, and this will take a toll on the values of used Suzuki products over time,” Gutierrez said.

“By year end, we could see values of used Suzukis drop by 3 to 5 percent, well in excess of the 1 to 2 percent depreciation expected for the rest of the industry, yet still relatively modest compared to the declines experienced by Saab post-bankruptcy,” he continued.

“As 2013 rolls around, we expect to see Suzuki’s values stabilize, since its models likely will remain appealing to those consumers seeking the most affordable vehicles available for sale,” he went on to say.

With used values expected to fall, KBB noted there still remains the question of what happens to the remaining new Suzuki inventory left on dealer lots.

According to AutoTrader.com, there are still more than 3,500 brand new Suzuki models available for sale nationwide.  Currently, there are 3,647 new Suzukis listed for sale nationwide on Cars.com.

“As a result of Chapter 11, many Suzuki dealers might be trying to clear out their inventories, which means shoppers could find a great deal,” said Joe Wiesenfelder, Cars.com’s executive editor.

“Potential buyers do need to understand that resale value will also be lower — unpredictably so — and parts could be harder to find,” Wisenfelder continued. “Additionally, we urge all shoppers to confirm with the dealer that there will be warranty coverage before buying.”

Gutierrez echoed several points raised by the Cars.com editor.

“Consumers looking for a new car at a sizable discount may want to consider buying one of the few remaining brand-new Suzukis,” Gutierrez said. “We wouldn’t be surprised to see significant discounts offered up by dealers as they try to liquidate their remaining inventory.  However, we don’t expect to see any major incentives offered by the company, so deals will be specific to each dealer based on their remaining inventory.

“For bargain-minded new-car shoppers, the discounts that are surely on the way for remaining new Suzuki inventory should be more than enough reason to at least consider a Kizashi or SX4 before they are gone forever,” he went on to say.

According to Edmunds.com’s cross-shopping metrics, Kia and Nissan are the two brands most shopped against Suzuki vehicles on its site.

Suzuki’s Strategy to Cut Dealer Ties

According a report by Bloomberg, Suzuki won interim bankruptcy court approval to borrow as much as $45 million, a portion of which might be used as cash payments to the brand’s 216 franchised dealers if the voluntarily surrender their store agreements.

The cash payments could come within 10 days, Suzuki lawyer Debra Grassgreen said Wednesday in federal court in Santa Ana, Calif., according to this report.

Should dealers agree to end their contracts by Nov. 30, Suzuki would pay them half of what they’re owed by the distributor within 10 days, according to court documents, which also show the dealers could later attempt to collect the rest of what they are owed through the bankruptcy process.

Another Suzuki lawyer, Richard Pachulski, said the company may owe dealers about $50 million, according to Bloomberg’s account of the proceeding.

An additional company attorney, James Stang, told U.S. Bankruptcy Judge Scott C. Clarkson that 69 percent of Suzuki’s franchised dealers sell fewer than five models a month.

Eric Snyder, an attorney for the dealers, said the offers may not be in his clients’ best interest since there may be close to 4,000 new models still in store inventory. Snyder added dealers have the legal right under state laws to send those units back to the manufacturer.

Leaders of both the American International Automobile Dealers Association and the National Automobile Dealers Association pledged their commitment to Suzuki stores earlier this week, a development Auto Remarketing reported here.

Suzuki’s bankruptcy filing also contains more than 5,000 pages of creditors, the single highest being American Suzuki Financial Services, which is owed $891,000.

Besides the franchised dealers, the list of creditors contains dozens of auctions, including 30 ADESA locations, 17 Manheim operations and several independent auctions.