U.S. plant took Subaru on new journey

Sitting at the crossroads of America's Corn Belt and Midwestern industry is Subaru Corp.'s lone manufacturing plant outside Japan.

Subaru of Indiana Automotive Inc., the plant that stocks Subaru's U.S. retailers with their most critical products, has operated for almost 30 of Subaru of America's 50 years, having begun production in 1989.

It has gone through rounds of investment, expansion and improvement, turning Lafayette, Ind., from a rural community into Subaru country.

The plant began as the product of an improbable joint venture between two small Japanese automakers: Subaru's parent company, then known as Fuji Heavy Industries, and Isuzu Motor Co., the truck-oriented maker that operated at the time as American Isuzu Motors. Their $500 million plant originally was named Subaru-Isuzu Automotive Inc.

Tom Easterday, now senior executive vice president at the plant, said after Indiana missed landing the Mitsubishi-Chrysler joint-venture factory that went to Illinois, the Hoosier State craved an auto plant.

Having a renowned engineering school in nearby Purdue University, as well as business programs at Indiana University and the University of Notre Dame, helped bring the plant to central Indiana, Easterday said.

Landing the venture was seen as a potential "big win" for Indiana, said Richard Marshall, former director of communications at Subaru of America. Marshall originally worked at the Indiana Department of Commerce while the automakers searched for a site.

"Political leaders saw an opportunity for jobs," Marshall said.

The Lafayette site was selected in December 1986 and a groundbreaking ceremony took place in May 1987.

The first vehicle, a Subaru Legacy, rolled off the line on Sept. 11, 1989.

Easterday, who started at the plant in July 1989 as its corporate counsel and sole attorney, said the blend of automakers and cultures was pivotal when the plant opened. The mix of personnel and philosophies from Fuji Heavy, Isuzu, Japan and Indiana provided a broader perspective on how to manage, Easterday said — a sort of checks-and-balances for companies that were new to the United States.

"It enabled us to make sure that our culture was good from the beginning."

When production began, Subaru built a sedan and Isuzu made the P'up small pickup. Subaru quickly added a Legacy wagon to the line.

There were growing pains in the early days, Easterday said. Japanese engineers sent to launch the plant had to assimilate to their new surroundings. Many were new to the United States.

"It was all sort of foreign to them," Marshall said.

Decision-making could be complicated because the joint venture had to consider the wishes of not just Fuji Heavy and Isuzu, but the interests of the joint venture itself.

And selecting and training employees took a lot of time.

Competition between Subaru and Isuzu was a nonissue because Subaru built cars and Isuzu made trucks.

But when Subaru introduced the Outback, a rugged, taller version of the Legacy wagon, the brand was suddenly tiptoeing into SUV territory. The Outback's intended segment was the same as Isuzu's Rodeo SUV.

"All of a sudden we had vehicles somewhat competing against each other in the same plant," Easterday told Automotive News.

At one point, Subaru ran an ad claiming that the Outback had more interior space than the Rodeo. Later, Subaru changed the comparison to the Honda Passport. That helped only slightly because the Passport also was being built by Isuzu at the Indiana plant as a rebadged Rodeo.

The venture ended in January 2003 when Fuji Heavy bought Isuzu's interest in the plant for $1.

The last Isuzu was built there in July 2004, leaving Subaru to pick up the rest of the plant's slack. For some time, a portion of the plant that Isuzu had used sat idle.

"That was a challenge," Easterday recalled. "We had not anticipated for Subaru to be all of production."

But as Outback sales strengthened, combined with additional nameplates such as the Baja and Tribeca, the plant bounced back.

In 2005, Toyota Motor Corp. became a major Fuji Heavy investor and by 2007, the first project between the two companies began: Toyota Camry production at the Indiana plant.

In 2007, at the U.S. launch of the Camry, Ikuo Mori, then CEO of Fuji Heavy, praised Toyota as a factory mate.

"The speed with which Toyota makes decisions is impressive," he said. "And in the area of logistics, production management and control, they have no equal.

"There are many opportunities for Subaru here. We no longer have to study them from a case file or book. We can do it on the plant floor right by their side."

The Indiana partnership between the two automakers lasted until May 2016 when Toyota removed Camry production, and by doing so, freed up capacity of 100,000 vehicles to fuel a new wave of Subaru sales growth.

"We certainly learned a lot from that period," Easterday said. Blending Toyota and Subaru manufacturing techniques enabled the plant to harness best practices from both automakers, he said.

The line that once built Camrys now builds Subaru's Impreza compact sedan and hatchback, which was shifted there from Japan in late 2016.

The newest Subaru nameplate, the Ascent, will be built starting in May in Indiana. The plant went through a $140 million expansion to prepare for the three-row crossover.

Easterday said the plant has maintained a small-town atmosphere even though it is far larger today than in 1989.

The plant, originally 2.3 million square feet, now covers 4.4 million square feet.

At first, plans called for annual production of 240,000 vehicles, split between the two original partners. But last year, Subaru obtained a new EPA emissions permit to cover higher production, with authority to build 514,000 vehicles a year — all for Subaru.

The factory built about 367,000 vehicles in 2017, with annual output forecast to reach around 400,000 once Ascent production has begun.

"I would have not imagined over 400,000 units," Easterday said, remembering the plant's original projections.

The number of employees at the plant originally was expected to reach 3,000. Once Ascent production begins, that number will top 5,800.

Easterday, who has been through the highs and lows of the manufacturing venture, said it has had a vital role for Subaru and will continue to do so.

"Subaru has done a tremendous job of evolving the brand," he said, "but keeping its basic DNA intact."