High-flying Subaru to add models, capacity

North American sales expected to rise 25% by 2020

Subaru's plant in Lafayette, Ind., is expected to add capacity for about 100,000 vehicles a year after Toyota ends contract production of the Camry there in the fall of 2016.

TOKYO -- North America is central to Subaru's ambitious new business plan that aims to boost global sales 33 percent by 2020.

Subaru will expand capacity in North America, add a plug-in hybrid and a new seven-seat SUV to showrooms and overhaul its powertrain lineup.

Yasuyuki Yoshinaga, president of Subaru maker Fuji Heavy Industries, unveiled the plan last week along with record results for the fiscal year ended March 31. Fuji Heavy hit records in unit sales, revenue, operating profit and net income.

Subaru achieved the goals of its previous business plan two years ahead of the 2015 timetable, thanks to booming sales. The new midterm plan, dubbed Prominence 2020, aims to continue that sales surge. It forecasts global sales will exceed 1.1 million units in 2020, up from 825,000 in the fiscal year ended March 31.

In that same time frame, North American sales should climb to 600,000 from 478,000.

The Japanese company says it also may expand annual capacity at its Lafayette, Ind., assembly plant to 400,000 units after 2017, on top of an expansion to 310,000, which is expected to be complete by the end of 2016.

Separately, Toyota Motor Corp. confirmed it will end contract production of its Camry sedan at Subaru's Indiana plant in the fall of 2016. Toyota will shift that Camry output to its Georgetown, Ky., plant, leaving Subaru with additional capacity of about 100,000 vehicles a year.

Yoshinaga said the plan aims to strengthen the brand power of rapidly growing Subaru.

"We want to be a company that may not be big in size but has distinctive character and high-quality products," he said. "We will enhance the Subaru brand."

His plan relies heavily on new product.

Starting in 2016, Subaru will introduce a modularized Subaru Global Platform that will support every model from the Impreza to the Outback. It will debut in the next-generation Impreza and be engineered with a focus on safety, maneuverability and interior space.

Among the new vehicles on tap is a seven-seat SUV geared toward North America to replace the aging Tribeca.

Subaru did not give details about the vehicle but said it will debut sometime between 2016 and 2020. The production site has not been finalized, but Yoshinaga said the company is leaning toward North America.

While three-row SUVs are big in North America, introducing a U.S.-specific vehicle is risky for a small company such as Subaru, says Kurt Sanger, an auto analyst with Deutsche Securities Japan. He says Subaru has sold 76,500 Tribecas since 2005 compared with more than 1 million Legacies and Outbacks.

"They won't be able to sell much of it anywhere else," Sanger said. "Ideally, they've learned from past failures of the Tribeca. You need some volume for the thing to pay for itself."

Yoshinaga: New product is key

Powertrain plans

Subaru also will introduce a plug-in hybrid for North America to meet U.S. zero-emissions regulations taking effect in 2018. That model will be based on Toyota's hybrid technology. Toyota owns 17 percent of Fuji Heavy.

Subaru also will upgrade all gasoline engines to direct injection, starting in 2016. The technology will be standard in a next-generation boxer engine Subaru will roll out.

To meet more stringent emissions standards, Subaru will overhaul its powertrain technology, adding cylinder deactivation and lean combustion cycles by 2020.

Yoshinaga said the company wants engines with thermal efficiency rates above 40 percent, which would top that of the engine in the Toyota Prius hybrid. Higher efficiency means more energy from internal combustion is captured to power the wheels, and less is lost through heat. The target may imply Subaru will turn to clean-burning Atkinson-cycle engines.

Subaru has been one of the fastest growing brands in the United States during the past five years. In 2013, its sales jumped 26 percent to 424,683, marking the sixth straight year of rising sales and the fifth year of record results. U.S. sales soared 22 percent to 152,471 through April, while the overall market edged up 3 percent.

Camry questions

Subaru's Indiana factory, its only assembly plant outside Japan, has capacity for 170,000 Subarus and 100,000 Toyotas.

The Camry pullout raises questions for Toyota.

Toyota does not plan to build a new line or plant at its Georgetown site to accommodate the additional Camry production, spokesman Brian Lyons said.

Lyons could not say how the maxed-out factory will churn out an additional 100,000 Camrys. Georgetown now makes the Avalon, Camry and Venza, and hybrid versions of the Avalon and Camry sedans.

Toyota plans to boost the factory's capacity to 550,000 from 500,000 now when the plant starts making the Lexus ES sedan in August 2015. c

You can reach Hans Greimel at hgreimel@crain.com -- Follow Hans on Twitter: @hansgreimel

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