Tops on Yoshinaga's to-do list: Squeezing out more Subarus
AUTOMOTIVE NEWS: Are you expecting another U.S. sales record next year?
YASUYUKI YOSHINAGA: Of course. Under our midterm business plan, our goal was 330,000 in 2015, but we are achieving that two years ahead of the original plan.
Photo credit: BLOOMBERG
TOKYO -- Subaru boss Yasuyuki Yoshinaga has an enviable problem. His company can't make cars fast enough to meet demand.
In the United States, Subaru's biggest and most important market, the all-wheel-drive specialist expects to sell 330,000 vehicles in 2012, for a fourth straight year of record sales.
Yoshinaga, president of Fuji Heavy Industries Ltd., Subaru's parent, says volume could be even higher if the company had more capacity. Topping his to-do list is devising a plan to squeeze extra output from the company's only North American assembly operation, Subaru of Indiana Automotive Inc.
Yoshinaga, 58, speaking through an interpreter, discussed his plans with Asia Editor Hans Greimel.
Q: What is your outlook for the U.S. market?
A: I see many articles saying sales will exceed 14 million. So the U.S. market is in good shape. And talking about Subaru, we expect to exceed last year's sales volume of 267,000 and reach 330,000 units this year. That will be the fourth year of record sales and the fifth straight year of sales growth.
What is propelling the rapid growth?
Right now, the Impreza is selling very well and is very popular. And we just added the XV Crosstrek. At the same time, we are keeping up the volume of the Outback. And we will be introducing a new generation of the Forester. So with this model mix we are expecting good numbers.
You plan to increase U.S. production capacity to 200,000 units in 2014. But you're almost there already. How high can you go?
About half of our U.S. volume is produced in the United States.
But our dealer body says if they can receive more vehicles, they can sell more. Their gut feeling is if they can receive more vehicles, we can achieve around 400,000 units [of sales].
To answer the dealerships, I am taking action. First, we will expand production capacity in Japan because we can do that quickly. And then as a next step, we plan to increase U.S. capacity to 200,000 units, from 170,000.
But if we have potential to reach 400,000 units, we have to take further action. So I aim to develop a plan by the end of the year. The U.S. dealer body invests its money to sell our vehicles, so as the manufacturer we have to invest on the production side.
So selling 400,000 is possible if you have the capacity?
The dealers say we can achieve 400,000 units. So my instinct is to believe them.
How long will it take to get to 400,000?
To achieve 400,000 units, first we have to expand production capacity. If we decide now [on how to increase capacity], we could expand the sales volume by around 2016.
What options do you see for expanding capacity?
We have not decided yet. But expanding Indiana is the biggest possibility. One reason is we already have the land. But Subaru also has a high-quality, value-added product that is well-regarded worldwide. So to maintain that quality, I'm not thinking of having plants in many different places.
What's the maximum capacity at the Indiana plant?
SIA was started as a joint venture with Isuzu and we have two lines. The so-called A-line was for Subaru and produces 100,000 units per year. The B-line was for Isuzu and also has capacity for 100,000 units a year. So total, there was 200,000.
For A-line, we have increased the capacity from 100,000 to 170,000, and we are planning to increase it again to 200,000. But that is the maximum limit for A-line. There is no way to increase capacity from there.
What about the B-line, which now produces the Toyota Camry?
On the B-line, we are producing roughly 90,000 units of the Camry, or roughly 100,000. If we increase that, the maximum could be 200,000, the same as the A-line. But that depends on negotiations with and the consent of Toyota.
Could you do joint production with Toyota on the B-line?
We are studying many possibilities, including whether that is physically possible or not. So I am saying we need time until the end of this year to decide internally. A third line could be one alternative, but it requires a large investment.
Talking about B-line, we can't decide by ourselves because it also involves Toyota. I'm talking with them about our ideas.
The most important thing for me is to increase the existing capacity, which is an expansion at the factory in Japan and also at SIA. But dealers are expecting a next step. So we need to give them some answer for the future.
How much capacity do you need in Indiana?
In the future, if we can sell 350,000 or 400,000 units per year, I think 250,000 to 300,000 units can be a figure.
U.S. sales are up 26 percent this year. Will that pace continue?
Based on experience, it is difficult to grow sales volume at this pace. But it keeps happening. For many years, our biggest challenge was to exceed 200,000 units a year. That was a difficult target for us. But last year we reached 267,000 and this year we can grow by another 60,000 units.
Do you need more dealers to support the surging sales?
Subaru of America has no plan to increase the current dealership number of around 620. We are planning to improve the quality and performance of the existing dealerships.
About 30 percent of our dealerships turn over every five years, so we are improving the mix.
What holes do you see in your lineup?
We are already increasing the lineup through the introduction of the XV Crosstrek, for example. We are not a full-lineup maker, so I don't think we have any holes.
Are you on schedule to introduce your first hybrid next year?
Yes, it's on schedule.
And it will be a variant of an existing model, right?
Will you extend hybrid technology across the lineup?
We haven't decided. We had strong requests from dealers to add an environmentally friendly vehicle to the lineup. If it is well-received, it is possible to expand the hybrid offerings.
You have suspended plans to start manufacturing cars in China because the government there hasn't approved your local joint-venture proposal. Where does that stand?
Our basic stance hasn't changed. We want to produce cars in the United States and China.
Subaru is not a big company. Our global volume is only 700,000. Unless there is a big market, there is no business case for us putting a factory overseas.
The only candidates for full overseas production are the United States and China. We haven't received any answer from the Chinese government.
We are still waiting.
Why is China stalling on granting permission?
I don't have an exact answer. But what I see in the media is that one of their concerns is Subaru's relationship with Toyota, which already has two local partnerships in China. And in that sense, Subaru's relationship with Toyota would be considered a third for Toyota.
Most Japanese automakers are trimming capacity in Japan because the yen's exchange rate undermines profits on exports, but Subaru is busy expanding at home. What is your strategy?
Automakers are diverging into two directions: One is toward commodity products. The other is toward value-added products.
Most big players expect their sales increase to come from emerging countries. So they are expanding production there. The battle there is decreasing costs and expanding volume.
Our volume is only 700,000 units per year. We can't go into that kind of battlefield, where players with volume in the millions are fighting. One example of our approach is our Eyesight precrash safety system.
We need to concentrate on value-added technologies, safety features and originality.
So long term, you don't expect to decrease capacity in Japan?
No, not at all. We don't plan any decrease. Look at Mercedes, BMW or Porsche. They are producing nearly 70 percent of their product in their own country. That's similar to us.
You can reach Hans Greimel at email@example.com. -- Follow Hans on