Lindsay Chappell
Lindsay Chappell
Infiniti, Nissan Reporter

Slow and steady wins at Subaru

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Score one for the tortoise.

Subaru's plan to invest $400 million to expand its U.S. auto factory is evidence that a long-term business outlook and a steady commitment to growth are worth more than neon headlines and Wall Street drooling.

Even in the car business.

Outsiders pronounced Subaru's Indiana assembly plant dead more than once in years past. The outsiders were always wrong.

Since 1989, when it opened the factory north of Indianapolis, in Lafayette, Ind., Subaru's industrial conglomerate parent, Fuji Heavy Industries Ltd., has stuck basically to one meat-and-potatoes business plan: Build the brand's highest-volume and most U.S.-centric models.

It has not been easy going.

In fact, to simply get the U.S. plant built in 1989, fledgling Subaru required a joint-venture partner from back home -- Isuzu Motors Ltd. (Remember Isuzu?)

Bad idea?

By the time the 1991 recession was under way, the plant looked to some like a bad idea. Subaru was having trouble selling Legacy sedans. Speculators conjectured that Nissan, which then owned 20 percent of Fuji, would step in and claim the factory for its own U.S. needs. (I asked the CEO of Nissan back then if that might be under consideration; he balked at the idea. Why would Nissan want a factory that's not built the way Nissan builds factories, he asked.)

And then Isuzu's SUVs were suddenly hot tickets. Outsiders now speculated that Isuzu was going to buy out Subaru's half of the factory to obtain more SUV capacity. (I asked the head of Isuzu at the time if he was thinking of that. He also balked. Subaru's side of the plant was a car assembly line, he reminded me. Isuzu was building trucks.)

It would be Isuzu who ended up vacating its half of the factory. In 2002, the tortoise bought the hare's interest for $1.

Tending to quality

All the while, Subaru followed a basic plan. Market the sedan. Polish the brand image. Improve the product. Tend to quality. Invest when possible. And use the little factory to its best competitive advantage. That included four years manufacturing a car-based pickup called the Baja. (Strange, but Subaru needed a pickup.)

And it constructed one of the U.S. industry's lowest-volume engine lines. (I asked a Subaru manufacturing executive how it could make sense to invest in an engine plant that produced only 120,000 engines a year. "It makes sense for us," he said.)

In 1989, when the factory started, Subaru was selling fewer than 140,000 cars a year in the United States. Last year it sold more than 336,000.

The expansion is not enormous; it will add 100,000 units of capacity in order to build the Impreza. The Impreza is Subaru's second-highest volume model and moving it to the United States is an obvious move.

But sometimes "obvious" is the simplest business plan.

You can reach Lindsay Chappell at lchappell@crain.com.

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