Spurned in China, Subaru plans big N. America push
Output will rise in Indiana; new plant possible
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TOKYO -- After stumbling in China, Subaru is doubling down on North America.
The brand has abandoned a plan, rolled out just 10 months ago, to start building cars in China by 2016. Instead, Subaru will pour its efforts into expanding in the United States, its biggest market.
The overhauled strategy, unveiled at the company's May 8 earnings press conference, calls for boosting output at its Indiana plant and possibly adding North American production capacity in the form of a new line or even a new factory.
Meanwhile, Subaru has lifted its U.S. sales target to 380,000 vehicles a year by its 2016 fiscal year, from a goal of 350,000 last year.
The shift follows Subaru's failure to win approval from Chinese authorities to set up a local joint venture with Chery Automobile Co.
Yasuyuki Yoshinaga, president of Fuji Heavy Industries Ltd., which makes Subaru vehicles, said he still wants to build vehicles in China, the world's biggest auto market. But he no longer is counting on doing it by 2016.
"We will prioritize expanding production in America while we watch the situation in China and consider what to do there when there are some developments," Yoshinaga said.
Last July, Yoshinaga unveiled a mid-term business plan that called for selling 180,000 vehicles in China by the fiscal year ending March 31, 2016. Subaru aimed to build 150,000 of those in China.
Now Subaru plans to sell only 100,000 by then -- all imports.
Subaru wants to make up some of the shortfall in its global sales goals in North America. Its revised target boosts annual North American sales to 410,000 units by the fiscal year ending March 31, 2016, from an earlier target of 380,000. U.S. sales are seen climbing to 380,000 vehicles in that period, from an earlier objective of 350,000.
Subaru plans to sell 324,000 vehicles in the United States in the current fiscal year ending March 31, 2013. That would be a 16 percent increase over 280,400 sold in the fiscal year that just ended.
Through April, Subaru sold 106,878 vehicles in the United States, up 16 percent from the same period last year.
In 2011, Subaru's U.S. sales advanced 1 percent to 266,989, despite limited output from factories thrown offline by the March 2011 earthquake and tsunami in Japan.
Across North America it aims for 356,000 sales this fiscal year, up 15 percent from 309,000 in the fiscal year that ended March 31.
Subaru wants a quick boost in North American output from Subaru of Indiana Automotive Inc., its assembly plant in Lafayette, Ind. That factory makes the Legacy, Outback and Tribeca.
The Indiana plant already is producing close to capacity at 170,000 vehicles a year, Subaru says. But Yoshinaga wants to churn out 200,000 annually by the middle of 2014.
Subaru has steadily lifted output at that plant from 100,000 units in 2010, to keep pace with soaring demand for its vehicles and to offset unfavorable foreign exchange rates that have hurt profits on imported cars.
Subaru did not say whether it would add a line, increase the speed of production or take capacity currently going to Toyota. The plant has a separate line that makes the Toyota Camry. Last year Subaru built 87,731 Camrys for Toyota.
Toyota Motor Corp. owns 16 percent of Fuji Heavy.
The Indiana plant is already humming at the stepped-up rate.
In the first four months of 2012 it built 67,937 Subaru-brand vehicles for an annual pace of about 184,000. It built 34,600 Camrys, putting it on track for about 99,000 this year.
Meanwhile, Subaru is looking at additional capacity to fill the gap in expected sales growth over the next four years.
Yoshinaga said the expansion would likely come at its Indiana plant, where the company has land to spread out. But Subaru is open to other locations as well.
| Subaru aims higher | |||
| Subaru's earnings took a hit in 2011 from Japan's earthquake. But it has big rebound plans this year. Figures are in million of dollars. | |||
| FY 2010 actual | FY 2011 actual | FY 2012 forecast | |
| Revenue | $19,217 | $18,439 | $22,608 |
| Operating profits | $1,022 | $534.80 | $814.40 |
| Net income | $611.40 | $468 | $583.40 |
| N.A. sales (units) | 307,000 | 309,000 | 356,000 |
| Note: Fiscal year beginning April 1. Results translated at an exchange rate of $1 = 82.27 yen, the rate on March 31, the last day of the fiscal year. | |||
| Source: Fuji Heavy Industries Ltd. | |||
You can reach Hans Greimel at hgreimel@crain.com. -- Follow Hans on 
