Malcolm Bricklin and the early days of Subaru

NEW YORK — Malcolm Bricklin, best known for the 1970s gull-wing sports car that bears his name, also co-founded Yugo of America in the 1980s. But his most lasting contribution to the industry came in the 1960s, when he co-founded Subaru of America with business partner Harvey Lamm.

He did it on a wing (to Tokyo) and a prayer, and with nerves of steel.

Special Correspondent Jim Henry interviewed Bricklin, 78, in December in his office here.

Q: Beginning this story at the end, when did you leave Subaru?

A: I started leaving officially in '72.

That's pretty early in Subaru history. What would you say your role was?

I spent my time working with Fuji [Heavy Industries, Subaru of America's parent company], getting a contract ... and running after letters of credit for Fuji. The more sales there were, the more LOCs we needed. Fortunately, we worked it out.

You needed financing to get cars, but you needed cars to get financing, right?

From the time you put the cars on a ship, it was two weeks to the West Coast. Then they went to the dealers. The bank had all this money, earning interest, for four or five or even six weeks [while the cars were in transit]. Keep in mind, the prime rate at times in those days was more than 15 percent. In the early days, this was the only way I could get banks to think financing Subarus was not a stupid idea.

Why would it be a stupid idea?

Japanese cars didn't have the great reputation they have today. Toyota and Nissan — Datsun, back then — had just started coming back from having a really lousy reputation.

Subaru had a rough start, too, didn't it?

I brought in the Subaru 360 [minicar]. Somebody called me and said, "Have you seen Consumer Reports?" I said, "What's Consumer Reports?" Well, we were on the cover of Consumer Reports with a story that said the 360 was a piece of crap compared with a Cadillac. At the time, they had a circulation of half a million. So I thought, so what? Half a million people saw it, out of how many million in the United States?

But the banks all read them. The dealers all read them. And the floorplan just stopped. I mean, it just stopped. Now, I've got cars coming, with letters of credit for them. Not only do I not have cash for the cars, now I need even more money, to put them in storage. ... I've got no money. The only chance in life is getting a contract for the bigger car.

You mean bigger than the 360 — the Subaru cars we later would know as the Subaru GL and Subaru DL?

Right. We had to go to Tokyo to get a contract signed. Now, I'm not in the best negotiating position. We are getting on the plane, Harvey [Lamm] and I, and we get paged, one of those "pick up a white courtesy phone" things. It's my secretary. We've got a telex that says, "If the purpose of your visit is to sign the contract, don't come." But we went anyway. I replied, "We're coming — and you're signing."

How'd it go?

We were there for a week, and we had received "no" for an answer every way it's possible to be told "no." Meetings, meetings, meetings, and the answer is "no." Understand, if we can't get this changed, I've got to go back and dismantle the company.

The company that sold the 360, right? So the contract you're now negotiating was a different contract?

In 1968 — February, I think it was — we signed the contract to bring in the 360. We received prior to that something like three cars in 1967, before we signed. But [after the Consumer Reports article] we had stopped buying 360s. We just stopped. The new contract superseded the old one. It was not an extension of the old contract in any way.

If Fuji Heavy said no, how did you get them to say yes?

It all came down to one final dinner, with Mr. [Eiichi] Ohara [who was later president and chairman of Fuji Heavy Industries]. I had always felt good in his company. And he was powerful. So we're at this dinner, and the music is blasting — blasting like an earthquake. And we're jet-lagged and exhausted, and there are drinks, and we're smoking — Marlboros — like chimneys, like everyone did back in those days — and I get such a headache.

They wanted to withdraw the brand from the U.S. temporarily and try again later.

Yes. Nothing is working. I used the same, logical arguments, over and over: They needed continuity. They couldn't fail the dealers and expect to come back. They needed to continue learning about the U.S. market. Wow — just thinking about it, I can feel that headache.

What was their response?

They told us, "Sorry, the car's not ready." We had already been there 400,000 times, and we knew the car was ready. Harvey turns to me and says, "What are you going to do?" I said, "Be prepared, because this could cause a tremendous amount of not-niceness."

What happened next?

Now, I don't think it's OK to insult people, but I did something that was totally out of character. I leaned across the table to Mr. Ohara and this, this — volume of stuff just came out. The gist of what I told him was, "Not going forward now would cause a worse problem for you than the war ever did!"

Harvey is practically hiding under the table. If I had an employee who talked that way to somebody, I would have fired them. But when I was all finished, [Ohara] said, "You have the contract."

What do you think changed his mind?

I think he could sense — how shall I say it? — the sincerity of the desperation.

Suddenly, we were the heroes of the world. Then we started negotiation of the contract with Mr. Ohara [especially the duration]. ... He said, "All right, 25 years." But I said, "No, I need perpetual." He said, "But in other markets, we never say perpetual. Can we say it, and you just don't tell anybody?" I said, "It's a publicly traded company. It'll be in the first contract — end of story." And we got perpetual. That really changed the relationship.

Why did you go public, anyway, with all the burden of reporting?

We realized we needed more equity to get the funding, so we decided to go public. But nobody would take us public.

We drew it up so it was intra-Pennsylvania, under this special thing for companies in Pennsylvania — it couldn't be bought or traded anywhere else. After two years, you could trade it anywhere. I think we were the only public company to use that format that didn't go bankrupt. a