Subaru to hit North America sales target ahead of plan

UPDATED: 11/13/14 9:54 am ET - adds details

TOKYO (Bloomberg) -- Fuji Heavy Industries, the maker of Subaru cars, will reach its mid-term sales target in North America at least three years ahead of plan, helped by demand for the Forester crossover and Legacy sedan.

The automaker expects to sell 600,000 units in North America by 2016 or 2017, Fuji Heavy CEO Yasuyuki Yoshinaga said in an interview in Tokyo Thursday.

The company will probably announce a new mid-term sales target after that, he said. Fuji Heavy is forecasting a third consecutive year of record profits, as the weaker yen and rising U.S. demand counter a slump in the domestic market.

Fuji Heavy in May set a target to raise annual sales to more than 1.1 million vehicles by March 2021, with North America accounting for 600,000 units.

The company is set to gain further as the yen weakens to a seven-year low helped by Bank of Japan's Oct. 31 decision to expand stimulus to end deflation.

Fuji Heavy made three in four of its vehicles at home and ships the majority of them to overseas markets, including the U.S.

Subaru views 100 yen to 105 yen versus the dollar as the ideal exchange rate, Yoshinaga said.

"I don't think the cheaper the yen the better," Yoshinaga said. "It's most important for the yen to stabilize at a neutral territory and doesn't fluctuate sharply."

Fuji Heavy plans to increase overseas production to account for about 40 percent of its total capacity by March 2021 to reduce the sensitivity to swings in foreign-exchange rates. Photo credit: BLOOMBERG

Overseas production

Fuji Heavy plans to increase overseas production to account for about 40 percent of its total capacity by March 2021 to reduce the sensitivity to swings in foreign-exchange rates, according to its mid-term plan.

The company is the only major Japanese automaker not to receive approval to manufacture vehicles in China, putting it at a disadvantage because imports carry a 25 percent duty.

The lack of factories in China worked to Fuji Heavy's advantage in 2012 after a territorial dispute over a group of uninhabited islands fueled a wave of anti-Japan protests.

Toyota, Nissan Motor Corp. and Honda Motor Co. all reported declines in China sales following the backlash.

Fuji Heavy aims to sell 120,000 vehicles annually in China by March 2021 through exports from Japan and by expanding its local dealer network, the company said.

It won't build a factory in China before 2020 even if it gets government approval, as the carmaker is focusing on boosting capacity in the U.S. and won't have the engineering staff to work on a China plant, Yoshinaga said.

The automaker is recalling 17,516 vehicles in the U.S. for airbags made by Takata Corp. Defective airbags have been found to explode with too much force, shooting shrapnel at occupants. Yoshinaga said he's watching the situation closely to see if there's any possible impact on global car production.

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