Subaru CEO cautious about service capacity

As Tom Doll takes Subaru of America into the summer sales season, the brand is deep into what he expects to be its 12th consecutive year of sales increases and 11th consecutive year of sales records. Two fresh products will help — the redesigned Outback midsize crossover and Legacy midsize sedan will both go on sale before fall. Subaru is aiming for U.S. sales of 700,000 vehicles in 2019, an increase of 3 percent.

Doll, 64, is the longtime face of the U.S. subsidiary, having joined Subaru in 1982. He was named CEO of the automaker, in Camden, N.J., in March 2018. He spoke with Staff Reporter Jack Walsworth. The following are edited excerpts.

Q: You've been CEO at Subaru of America for more than a year now. How did your first year go?

A: It was a real tribute that [former Subaru of America CEO, now Subaru Corp. CEO] Tomomi Nakamura decided when he went back not to put in another Japanese person and instead allow me the opportunity to be the CEO, but I feel like I've been doing it for the last 10 years anyway. There's not much of a difference between a COO and a CEO, at least at our company. Essentially, all the operating areas reported into me, including the marketing and advertising and so on.

Mr. Nakamura and before him President Yasuyuki Yoshinaga allowed us to implement the programs that we've implemented and to go down this route of "Love is what makes a Subaru a Subaru" and help to change Subaru's perception in the marketplace using the Love Promise, these Share the Love activities and Share the Love at the end of the year.

You've pressed for more retailer service capacity for a long time. How is that situation?

We're working with our retailers on that because, with our growth, the service capacity needs to be enhanced. A lot of our retailers are doing that. They're taking the profits that they're earning and reinvesting those back into their stores, into more lifts and bays.

Is that going on everywhere?

Some markets are more challenging than others. If you get into some of the more mature markets like Philadelphia; Washington, D.C.; Seattle, Wash.; Portland, Ore.; or Denver, our retailers are in great locations, but they're on smaller footprints. That means we have to be smarter in terms of how to utilize the fixed investment that the retailer has.

There are ways that they can maximize that by going to another shift, doing four 10-day shifts or three 12-day shifts and working more on weekends so they can better utilize the existing capacity that they have without adding a whole lot of additional fixed cost.

We have to make sure we don't over "fix-cost" the retailers because of the current level of recalls that we have. We have to be careful, once the quality gets back to what it normally was before, and what we think it's going to be in the future, about what is the proper level of lifts and bays, technician count and service adviser count that our retailers need to have.

What's your outlook for the summer selling season and the rest of 2019?

Just like all the other manufacturers, we're worried about potential weaknesses in the economy caused by some of the economic stuff that's been going on. But so far, from a demand standpoint, our leading economic indicators are very bullish. We're not really seeing the softness that you might be seeing in the market.

What do you see happening with the redesigned Legacy sedan?

Based on our research, one of the reasons why people may have shied away from a Subaru sedan may have been because of the interior. If you look at the Legacy interior now, it's second to none. When you look at the price point where the Legacy competes, and what you're getting at that price point, I think customers are going to be very impressed.

We're not going to sell numbers like Accord, Camry or Altima, or anything like that. But that sedan market is of such a size that we think the new Legacy will do at least as good, if not better, than the old one.

Is the Indiana plant getting close to running out of capacity?

Right now, we've got enough production capacity — whether it's at our factory in Indiana or in Japan — to get us to our midrange target over the next four to five years of about 800,000 vehicles. As we go through these next couple of years, depending upon how the market goes and sales go, we'll be making decisions on what to do: if another plant's necessary or perhaps how to expand the existing capacity on the footprint we already have. But those decisions are really a couple years out.