Yugo wanted to stay in, but simply couldn't. Sales did fall to minimal level in '89 but had grown again in 90 and 91, so they didn't leave because of poor sales (and they had actually made many improvements to their cars for '90 so they weren't really planning on leaving)
Reliability and build quality are two different things, Yugos have scored well in used car guides for reliability - but like any other 3rd world car (or like an American car from the 70s) they weren't put together with the same fit and finnish of most other European or Japanese, but at $4000 they could afford to do this, whereas more expensive cars were looked at much more critically for this.