Underdog Subaru turns 50

Subaru of America is fresh off its best U.S. sales year.

Its lineup is anchored by three all-wheel-drive crossovers that remain in strong demand, and the brand has achieved 74 consecutive months of year-over-year sales increases.

This year, with a flowing pipeline of fresh products headed to retailers, including its largest model ever, the three-row Ascent, Subaru anticipates it will chalk up still another record sales year in the United States.

That hasn't always been the narrative for Subaru, a car brand created by the Japanese industrial conglomerate formerly known as Fuji Heavy Industries.

This month, as the automaker marks its 50th anniversary of selling vehicles in the U.S., Subaru of America officials and people who shaped today's business over the last few decades remark that success has been a long, and occasionally bumpy, road.

Since its start here in 1968 as an importer of a quirky microcar called the 360, Subaru has fought — and usually won — a slew of uphill battles to reach the market position it enjoys in 2018.

But the automaker isn't resting at 50.

"You can't get satisfied," said Tom Doll, president of Subaru of America, in Cherry Hill, N.J., a headquarters on the opposite side of America from the Los Angeles-area locations that Asian automakers maintained in the 1970s and 1980s.

Doll has been an influential force in getting Subaru where it is today.

Since joining the automaker in 1982, Doll has been through moments when Subaru struggled to sell 100,000 vehicles and dealt with bloated inventories. But he also has witnessed its expansion and record growth in the U.S. firsthand.

"A lot of us at Subaru have been around for a long time," Doll told Automotive News. "We've seen ups and downs. We've learned what not to do, and we've learned what works for us."

He has seen considerable change in his own role at Subaru during his 36-year career with the company, holding positions from manager of treasury operations to CFO to COO. He's been president since 2013.

An accountant by trade, Doll worked at Arthur Young and Co. in Philadelphia before joining what was still, in 1982, a fledgling automaker with no guarantee of succeeding here.

A colleague at Arthur Young knew someone in the Subaru human resources department and mentioned to Doll that there was a job posting for an audit manager.

But before that, Subaru was still the brainchild not of a Japanese industrial company, but of two American entrepreneurs — Malcolm Bricklin and Harvey Lamm.

Subaru of America was incorporated in Bala Cynwyd, Pa., on Feb. 15, 1968, as an independent import company with an exclusive contract to market and distribute cars made by Fuji Heavy in Japan.

Bricklin was president while Lamm served as executive vice president and national sales manager.

The utilitarian 360 microcar was the first vehicle they sold under the Subaru banner in the U.S. Despite its friendly looks and weight of less than 1,000 pounds, it was painfully slow. It contained a puny 25-hp engine.

Subaru of America was a publicly traded, independent, national distribution company. But it had its own independent distributors, two of which live on today: Subaru of New England and Subaru Distributors Corp. of upstate New York.

Subaru of America went public in 1972 simply because it needed the cash flow, according to the founders.

Bricklin left Subaru that year. His success in getting the company off the ground would spark an entrepreneurial career that included helping to launch Yugo of America and the creation of the gull-winged Bricklin SV-1 sports car.

Lamm stayed on and became CEO, and later chairman, before leaving in 1990. By then, the U.S. business was deeply integrated into parent company Fuji's larger plans.

Another early Subaru model, the FF-1, was better sized for the U.S. And better yet, it was twice as powerful as the 360, though it remained a gas sipper.

But in the mid-1970s, it was not merely product enhancements that made Subaru a viable business. It was also world politics.

Like other Japanese import brands, Subaru saw its fortunes unexpectedly change for the better when the 1973 oil embargo struck. At the time of the Organization of Arab Petroleum Exporting Countries' embargo against the United States, which sent a panic wave over American consumers, the average fuel economy of domestic cars was just 13 mpg. Car buyers suddenly developed a desire for smaller and more fuel-efficient cars, making small vehicles from Japan overnight sensations.

In 1972, all import brands combined — including storied European luxury makes and the volume-market Volkswagen — held just a 13 percent share of the U.S. market. That shot up to a then-record 15.9 percent in 1975. The import industry never looked back. Today, it enjoys a nearly 56 percent share.

Subaru of America rapidly reaped the benefits of the more fuel economy conscious U.S. consumer base. In 1974, Subaru sold 22,980 vehicles in the U.S. Just three years later, it sold 80,826 vehicles.

Also in 1974, Subaru introduced its first four-wheel-drive wagon, with trim lines called DL and GL, unusual in that it was a 4wd car at a time when even 4wd on trucks was a standout feature. It foreshadowed the wagonlike crossovers that Subaru sells today in the Outback, Forester and Crosstrek.

The little wagon would prove important from a marketing standpoint as it became the official car of the U.S. Ski Team. That distinction gave Subaru cachet among outdoor enthusiasts and active lifestyle consumers, a key part of its brand today.

In 1980, just 12 years after the introduction of the 360, Subaru sold 142,968 vehicles in the U.S. Optional 4wd became available in all models that year as well. By 1983, it had sold its 1 millionth vehicle in the U.S.

As the company began to grow, so did its facilities. In 1986, it moved its headquarters to a $15 million, seven-story building in Cherry Hill, N.J., just outside Philadelphia. Soon after came an even bigger investment in the U.S. — a manufacturing plant.

Fuji Heavy formed a joint venture with Isuzu Motors to build and operate a $500 million plant in Lafayette, Ind., northwest of Indianapolis. The two automakers would produce unrelated products — light trucks for Isuzu and cars for Subaru. Fuji initially held a 51 percent stake, while Isuzu held 49 percent, in the plant, named Subaru-Isuzu Automotive Inc.

Before Richard Marshall joined Subaru of America as its director of corporate communications in 1989, a role he was in through 2000, he worked for Indiana's department of commerce, serving as a liaison between the state government and the two Japanese automakers.

"There was pressure that we at the state really needed to win this one," he recalled of bringing the factory to Indiana after the state had missed out on auto plants going to Kentucky, Tennessee and Illinois.

Indiana offered the venture an incentive package valued at $90 million to cover worker training and road improvements and to provide tax abatements.

For its part, Subaru felt a strong desire for a manufacturing plant — not just for the immediate production supply, but for planning.

"We had to have a U.S. production plant," Doll said, for the brand to further develop.

But the joint venture came with challenges.

Marshall described the venture as a bit of a forced marriage, which led to some initial public skepticism as to whether it could succeed.

"These were two companies that had never worked together," he said.

Vehicle production began Sept. 11, 1989, with a Subaru Legacy sedan as the first model off the line. It was immediately followed by a small Isuzu pickup named the P'up.

"Most people thought Isuzu was the stronger of the two players," Marshall recalled, given Subaru's car-focused portfolio as other automakers began debuting SUVs.

But it was Isuzu that eventually ran into trouble. The venture ended in 2003, when Fuji bought its former partner's interest in the plant for a token sum — $1.

"The joke was, they overpaid," said Subaru dealer Don Hicks, president of Shortline Auto Group in Aurora, Colo. "At the time, they didn't need the capacity."

Today, however, Hicks added, "Subaru needs everything they can build."

After Isuzu left, the plant was renamed Subaru of Indiana Automotive Inc. Subaru has invested heavily in it, with multiple improvements and expansions. The plant supplies retailers with crucial products: the Outback, Legacy and Impreza sedan and hatchback.

For a short time, the plant also supplied Toyota dealers with Camrys. That run ended when Subaru needed more capacity to bring Impreza production to the United States from Japan in 2016.

Production of the brand's newest nameplate, the Ascent, will start there in May.

Fuji stakes its claim

That sort of U.S. expansion brought changes at the company itself. On Aug. 31, 1990, not long after the Indiana plant began production, Fuji Heavy Industries acquired full ownership of Subaru of America. Fuji already had held a 49.6 percent stake of the U.S. company. But a weakened dollar, an aging product line and growing competition in the 4wd field was making the U.S. operation vulnerable to a possible takeover bid.

With the acquisition, Fuji took direct control of the U.S. company and operated it without interference from outside investors.

Unfortunately, at that moment, Subaru sales were on the decline. Subaru sold 108,547 vehicles in the U.S. in 1990. Just four years earlier, it had sold 183,242 vehicles.

Hoping to build buzz for the brand, Subaru turned to Wieden & Kennedy of Portland, Ore., in 1991 as its agency of record. It was the automaker's first ad agency switch in 17 years.

The artsy West Coast agency had built a reputation for youthful and edgy ads for Nike, including the iconic "Just do it" campaign.

Subaru was the agency's first automotive account, and its staff of young and avant-garde art directors created a campaign with the tag line "What to drive."

It was visually striking, the public agreed. But Subaru's executives concluded that "visually striking" wasn't selling cars.

Wieden & Kennedy was responsible for marketing the SVX, a sporty, high-performance car unlike anything Subaru had attempted. The coupe's far-out looks included a window-within-a-window feature that still stands out. But the model also cost significantly more than any other Subaru. That turned up the pressure even more on the advertising challenge.

The brief relationship ended with Subaru abruptly firing the agency, cutting its own U.S. work force and undertaking another agency review in 1993.

For Subaru, things get tough ... er

Subaru's product line at the time didn't help, and the automaker's sales declined further. At one point, Subaru had a 300-day supply of inventory, with hordes of vehicles parked on fields around the Indiana plant.

In 1993, its U.S. sales declined to 104,179 vehicles. The next year was even worse, totaling just 100,619 vehicles.

One obvious problem: Subaru had no pickups, no SUVs and no minivan.

"I never once heard a customer come in and say, 'When's Subaru going to come up with a 2+2, six-cylinder sports car for $30,000 because I'd buy that,' " recalled Bill Garcia, dealer principal at Hodges Subaru in Ferndale, Mich., near Detroit "I would have much rather seen them come up with a minivan design or some multipassenger vehicle."

Along the way, Subaru changed its nomenclature from "four-wheel drive" to "all-wheel drive." It claimed that research revealed that car consumers associated 4wd with pickups.

The automaker also began targeting very specific groups who might be drawn to the brand's awd offerings. This included not just rugged, outdoors-oriented consumers, such as canoers, kayakers, skiers and backpackers, but also people who simply needed more assurance about getting to work in challenging conditions. They included health care workers, teachers and education administrators, engineers and other technical types.

Another change: There would be no more budget-busting Super Bowl ads, which the company had used to introduce the Impreza in 1993.

They called it an SUW

A bigger change occurred in 1995, when Subaru shifted all of its U.S. models to awd.

"That was a bold decision at the time," Doll said. "Half of our products were front-wheel drive."

That change ignited a new era for Subaru, Doll noted. And it came with two new nameplates.

The Outback, essentially a Legacy wagon that had been bulked up, joined the lineup in 1994 as a trim line for the wagon. It became a separate nameplate a year later. To differentiate it, Subaru tagged the Outback "the world's first sport utility wagon."

"We wanted to make it appear it was an SUV," Doll said.

To launch it in that spirit, Subaru acquired the outdoorsy star power of Paul Hogan, the Australian actor of Crocodile Dundee fame, as the Outback's pitchman.

Hiring Hogan "was a tipping point," said Alex Fedorak, a former member of Subaru's public relations team.

Fedorak noted that Hogan once had been a vehicle salesman, and when Subaru brought him to a dealer meeting, he easily connected with its retailer base and the Outback.

"He told us, 'You better be able to build a lot of these because I'm going to sell the hell out of them,' " Fedorak recalled.

But there was more to the Outback than a rugged name and looks.

Subaru made it a capable off-road vehicle with a healthy amount of ground clearance, noted Mike Geylin, who did outside media work for the automaker in the early 1990s and again in the 2000s.

"It was more than tape and stripes," he said of the Outback. "The car could perform."

Geylin was responsible for planning the Outback media launch in the central coast region of California. To map out a driving route for the press and others to experience the Outback, Geylin himself used a Jeep Wrangler. The off-road portion of the program took a grueling two hours, and Geylin recalled that it was a "challenge" even in the Wrangler.

However, the Outback prevailed, he noted, and the vehicle was positively received by the media.

"That proved the point," he said of the Outback's off-road chops.

Following the Outback, Subaru introduced the Forester in 1997 as a smaller vehicle that shared the Outback's image and driving traits.

"We were looking for market opportunities where we could compete," Doll said. "That was the genesis for Outback and Forester. The products were executed that way."

The two models gave the brand two anchor products that remain its strongest-selling nameplates.

Last year, 188,886 Outbacks were sold. The Forester came in second place, with 177,563. Each nameplate outsold the entire annual Subaru brand volume of those challenging 1990s years that spawned their birth.

Then the General walked in

Other twists and turns have come along in the last 20 years.

In 1999, General Motors purchased a 20 percent stake in Fuji, becoming the company's largest shareholder, for $1.4 billion. That arrangement initially looked to many like it would open new opportunities for the two companies.

But little resulted.

The most visual outcome was a new model for one of GM's other holdings, Saab, with the Saab 9-2X. The car was a reworked Impreza WRX compact — pundits quickly dubbed it the "Saabaru."

The GM-Fuji alliance didn't last long.

In 2005, GM sold its Fuji stake for a paper loss of between $700 million and $800 million. Toyota Motor Corp. paid GM $302.6 million for 68 million shares, equal to an 8.7 percent stake in Fuji, while Fuji bought back the rest of GM's stake.

Since then, Toyota's stake has grown to 16.5 percent, making it the largest shareholder in what is now Subaru Corp.

Recent years have given Subaru of America a new challenge to ponder — how to expand.

The automaker's East Coast heritage has made the Northeast a traditional strong point for the brand.

According to Geylin, Subaru is so solid in New England that Subaru is jokingly referred to as the official state car of Vermont.

But to expand Subaru's retail base, Doll said finding dealers in nontraditional markets was sometimes a challenge.

"We were weak everywhere else," he said bluntly.

Potential dealers needed convincing about Subaru's future product plans and the brand's direction overall. That was particularly true where Subaru most needed to increase penetration — the Sun Belt.

Getting consumers and dealers on board with Subaru's awd portfolio in locations that rarely, if ever, saw snow was a tough task.

"We had to develop a retail network there," Doll said of the Sun Belt markets. "We recruited retailers, identified them and wanted them to represent Subaru. That was tough at the time because we were small. We weren't well-known."

But Subaru's retail development outreach and marketing attention in the South and Southwest have returned dividends for the automaker. In 2017, 23 percent of Subaru's U.S. sales came from the Sun Belt, Doll said.

"That helps us to have a national presence," he said.

To keep up with its growth, Subaru has devoted more attention to increasing its retail service capacity. Doll believes the brand's ability to grow will be limited by the ability to service the vehicles it already has sold and making sure those customers have a positive service experience to keep loyalty high.

In some metropolitan areas, service departments are operating on double shifts and weekends but still can't keep up with demand. In 2013, Subaru began offering financial incentives to retailers to expand and invest in their service departments.

Doll has said participation in the Fixed Operations Expansion program, or FOX, has exceeded the automaker's expectations, with roughly two-thirds of Subaru's retailers participating.

Show me the love

Now that awd has become a recognized pillar of the brand, Subaru is promoting another defining concept, which it calls "love."

In 2007, Subaru named Carmichael Lynch of Minneapolis as its agency of record. The hiring came after the automaker had launched the "It's what makes a Subaru a Subaru" ad campaign.

The word "love" entered the advertising mix in 2008, with a marketing approach that remains part of Subaru's strategy.

Doll said its not uncommon for him to hear from a customer that they've had the same Subaru for 10, 15 or 20 years.

"They become attached to it," he said. That sense of attachment has been highlighted in ads over the years.

The spots focus on safety, outdoors and love between owners, whether toward a family member, pet or a Subaru vehicle.

"The love affair with Subaru is very real," Geylin said of Subaru owners. "It's a tight community."

Subaru initially committed two years to the campaign. But it quickly became apparent to Subaru that the "love" was resonating.

Subaru then doubled down and structured its holiday season sales event around the campaign.

"Share the love," began not long after the "love" campaign launched. Last year marked the 10th consecutive annual sales event to use it. The basis is simple. Subaru donates $250 to charity for each vehicle sold between November and January.

The campaign is a stark difference to what the company previously ran, when year-end campaigns routinely focused on vehicle features and pricing to move metal. In the most recent campaigns, Subaru vehicles are absent from the ads.

"It's been a good campaign for us," said Garcia, the Detroit area dealer. "It's heartfelt. But now they're pushing it more and showing that they're doing good in communities. That has helped us."

U.S. sales would continue to increase. In 2006, Subaru sales surpassed 200,000 vehicles for the first time ever, at 200,703.

Subaru's decadelong streak of yearly U.S. sales increases began in 2008, as the U.S. plunged into a recession.

Not only was 2009 — a year of harrowing trouble for some automakers — Subaru's best sales year ever, up to that point, it was the beginning of a nine-year streak of consecutive record sales.

"As the economy weakened, we went right through it," Doll said. "As we came out of it, we brought new products out."

A redesigned Forester launched in 2008, followed by a redesigned Outback and Legacy in 2009.

The company quickly added the BRZ coupe and the Crosstrek, a raised and cladded Impreza hatchback.

By 2016, U.S. sales had reached 615,132.Last year, 647,956 sales. Through January 2018, Subaru has chalked up 74 consecutive monthly year-over-year sales increases.

This year finds Subaru and its parent company a long way from the small sales outpost the U.S. represented 50 years ago. The market has become the Japanese manufacturer's most important.

But Subaru's past and less certain times have not been forgotten.

"We know what it's like to scrape and skimp and save money and have to make payroll," Doll said.

Forecasts for U.S. new-vehicle sales in 2018 hover between 16.7 million and 16.8 million, down from 17.2 million in 2017. That does not mean Subaru's fortunes will decline, but it does mean the competition across brands will be fiercer.

"I hate hearing people say, 'It's got to start coming back down,' " Doll said. "It will if you think that way. But we don't think that way."

This year will bring more key events.

In addition to moving into a new U.S. headquarters in nearby Camden, N.J., Subaru will launch another round of fresh products. The three-row Ascent crossover fills a segment hole and lands in early summer, while the next-gen Forester comes later. A plug-in hybrid variant of an existing model also is expected to join the lineup.

Subaru Corp. believes the U.S. company will buck the shrinking overall market and deliver 5 percent sales growth. If so, it would set still another yearly record, with about 680,000 sales.

Declares Doll: "There's no reason this thing can't go on."