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Subaru struggles to satisfy customers

Better service is president's priority

Yoshinaga: Investments in service operations will pay off for dealers.

TOKYO -- Subaru, flush with record profits and poised for a sixth straight year of record U.S. sales, may be a little too hot for the liking of Yasuyuki Yoshinaga.

The brand may have trouble keeping the legions of new customers it has attracted because not all dealers can keep up with recent skyrocketing sales, warns Yoshinaga, president of Fuji Heavy Industries, Subaru's parent company.

Getting dealers to invest in new service facilities is his top priority. He sees it paying off for dealers in the form of a targeted 42 percent increase in per-store sales by 2020.

"Over the past several years, our U.S. sales have increased dramatically, and so have the number of new-to-Subaru customers," Yoshinaga said. "The real contest will be keeping those customers satisfied with our vehicles and our service so they will purchase a Subaru again. This is the most important thing."

Through June, Subaru's U.S. sales have put it among the market leaders, shooting up 16 percent in a market up only 4 percent. But dealers haven't led in taking care of customers.

Subaru ranked fourth from last in J.D. Power and Associates' 2014 Customer Service Index, which measures customer satisfaction with dealer service for maintenance or repair work. Subaru scored a 776, well below the mass-market brand average of 797 and ahead of only Dodge, Jeep and Ram.

The lackluster showing could undermine rosy sales forecasts at Subaru, which has been on a tear in the United States. The company wants North American sales to soar 25 percent to 600,000 units by fiscal 2020, which ends March 31, 2021, from 478,000 units in the fiscal year that ended March 31.

At a dealer meeting in Seattle last month, Yoshinaga urged his retailers to pour money into more than just flashy showrooms. The problem is the oft-neglected garage, where dealers often lack such basics as enough service bays to work on cars, he said.

"Generally speaking, the first investment goes into new-car showrooms. Now we are investing into service facilities to improve our customer satisfaction," Yoshinaga told Automotive News. "For example, some stores need six service stalls, but they only have three. That makes our service weak."

At a meeting during the National Automobile Dealers Association convention in January, Subaru of America Inc. gave its dealers details on its "Fixed Operations Expansion," or FOX, program which will provide recommendations and cash to support dealers' investments in lifts, added service bays and other equipment. The amount will vary with the size of the dealership.

A changing of the guard

Separately, Subaru of America said Bill Cyphers, a 30-year veteran of the company and one of the executives who helped the brand's sales skyrocket, will retire. He has been senior vice president of sales since May 2011.

The company appointed Jeffrey Walters to the post, effective July 1. Walters has been with Subaru since 1992, most recently as vice president of field operations. He has worked in sales, distribution and marketing.

Cyphers will continue with the company until the end of 2014 in an unspecified capacity, Subaru said. He began his career at Subaru in 1984 and previously had vice president jobs in sales, sales operations, marketing, distributor operations and other regional locations.

Fuji Heavy will support dealer investment with a wave of new products and technologies, Yoshinaga said. The company also is expanding local capacity at its Indiana assembly plant to feed surging demand.

This year, Subaru is rolling out a redesigned Legacy sedan and Outback crossover in the United States. After that, it plans a new seven-seat SUV to replace the aging Tribeca and a plug-in hybrid.

In 2016, the company will also unveil a new platform to serve all vehicles from the Impreza compact to the Outback crossover. Dubbed the Subaru Global Platform, it will enable engineers to develop six vehicles in the time it now takes to do five, Yoshinaga said. From 2016, the automaker also will introduce direct injection and lean-burn technologies, including cylinder deactivation, to all its engines.

The plug-in hybrid will be a variant of a nameplate already in the lineup, Yoshinaga said, declining to identify the vehicle. It will be offered as a 2018 model in California and 12 other states to satisfy zero emissions requirements, he said. Rollouts in other states are undecided.

The plug-in hybrid may be introduced later to Europe or China, Yoshinaga said.

Dealer throughput

The automaker's investments should pay off handsomely for dealers, he said.

Subaru has 621 dealerships in the United States, averaging sales of 700 vehicles a year. Yoshinaga aims to keep that number steady but boost throughput, or per-store sales, to around 1,000 units a year by fiscal 2020.

Yoshinaga said he has not yet decided where to build the seven-seat SUV. That vehicle will debut sometime between 2016 and 2020.

But Fuji Heavy has said it may expand annual capacity at its Lafayette, Ind., assembly plant to 400,000 after 2017, from a planned expansion to 310,000 slated to happen before then. Extra space is being created because Fuji Heavy will end contract production of the Toyota Camry sedan for Toyota Motor Corp. at the plant in the fall of 2016, leaving Subaru with 100,000 units of unused capacity.

Yoshinaga's current business plan, unveiled in May, aims to boost global sales by a third to more than 1.1 million units in fiscal 2020, from 825,000 in the fiscal year that ended March 31.

Subaru is well on its way toward its goals.

North American sales should hit 594,000, nearly the 2020 goal of 600,000, in the fiscal year ending March 31, 2017, or three years ahead of schedule, predicts Akira Kishimoto, an auto analyst at JPMorgan Securities Japan.

Yoshinaga denied setting his sales targets too low.

"Many people say we are being too aggressive," he said. "If it turns out we are overly conservative, I will be very happy indeed."

Diana T. Kurylko contributed to this report.

You can reach Hans Greimel at -- Follow Hans on Twitter: @hansgreimel

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