Subaru plans more U.S. capacity, unveils new technology

Parent company Fuji Heavy boasts record financial results, sales for fiscal year

TOKYO -- The maker of red-hot Subaru vehicles, flush with record profits, today unveiled an ambitious new business plan targeting a 20 percent increase in sales by 2020 through the introduction of a new vehicle platform and more efficient fuel-injected engines.


Fuji Heavy Industries Ltd.'s plan forecasts North American volume of 600,000 in that time frame, up from 478,000 units in the just-ended fiscal year, as Subaru benefits from booming U.S. demand.


The Japanese company says it may also expand annual capacity at its Indiana assembly plant to 400,000 units after 2017, from a planned expansion to 310,000 slated to happen before then.


Subaru is the only brand to increase U.S. sales in each of the past six years and has recorded double-digit increases in each of the past 16 months.
Through April of this year, Subaru sales are up 22 percent while the U.S. industry has risen 3 percent.


Subaru may need the extra output to meet its sales goals.
And it now has more room to expand because Toyota Motor Corp. confirmed separately that it will end contract production of its Camry sedan at Subaru's Lafayette, Ind., plant in the fall of 2016. Toyota will shift the Camry to its Georgetown, Ky., plant, leaving Subaru with unused capacity of about 100,000 vehicles.


Record sales and earnings
Yasuyuki Yoshinaga, president of Fuji Heavy, unveiled the plan today while announcing a slate of record earnings for the fiscal year ended March 31, including record unit sales, record revenue, record operating profit and all-time high net income.


Unit sales climbed 14 percent to 825,000 units in the 12-month period. Subaru projected another 11 percent increase to 916,000 vehicles in the fiscal year that began April 1.


Sales should exceed 1.1 million units in 2020, Yoshinaga said.
Yoshinaga actually had to introduce the new mid-term plan, dubbed Prominence 2020, because he had achieved the previous business plan two years ahead of its 2015 timetable.


“We were fortunate in being able to achieve almost all our objectives two years ahead of schedule,” Yoshinaga said.


The Fuji Heavy boss said his new business plan aims to strengthen the brand power of rapidly growing Subaru, which sells the Forester crossover, Legacy sedan and Outback wagon.


“We want to be a company that may not be big in size but has distinctive character and high quality products,” he said. “We will enhance the Subaru brand.”
New product underpinnings are key to the new strategy.


New platform and engines
Starting in 2016, Subaru plans to introduce a new modularized platform called the Subaru Global Platform that will support every model from the Impreza to the Outback.


It will debut in the next-generation Impreza and be engineered with a focus on safety, maneuverability and interior space.


Among the new products on tap is a seven-seat SUV geared toward the North American market to replace the aging Tribeca.


Subaru did not give details about the vehicle but said it will debut sometime between 2016 and 2020. The production site has not been finalized, but Yoshinaga said the company is leaning toward manufacturing the vehicle in North America.


The vehicle could plug the gap created by the Camry pullout.
Subaru will also convert all its gasoline engines to direct injection, starting the same year. The technology will be standard in a next-generation boxer engine Subaru will roll out.


To meet more stringent emissions standards, Subaru will overhaul its powertrain technology to also include cylinder deactivation and lean combustion cycles by 2020.


Yoshinaga said the company wants engines with thermal efficiency rates above 40 percent -- above that of the engine in the Toyota Prius hybrid. The target suggests Subaru will dabble with clean-burning Atkinson cycle engines.


Higher efficiency means more energy from internal combustion is captured to power the wheels and less is lost through heat.
Subaru will also introduce a plug-in hybrid for North America, to meet U.S. zero emissions vehicle regulations taking effect in 2018. That model will be based on Toyota hybrid technology.


In addition, Subaru outlined plans for a new version of its Eyesight anti-collision safety feature. It will help drivers avoid not only frontal collisions but crashes from any direction.


Slashing costs
The mid-term plan aims to shore up profits by slashing unit costs 20 percent by 2020. The savings will largely come through reducing material costs through more efficient vehicle designs, standardized platforms and leaner manufacturing processes.


Yoshinaga detailed the strategy while announcing bumper earnings results inflated by surging U.S. sales and a weak yen.
Operating income nearly doubled to 93.1 billion yen ($905.6 million) in the January-March fiscal fourth quarter, from $457.2 million the year before.
A $266.5 million windfall gain from the depreciating yen helped drive earnings higher.


Fourth-quarter revenue rose 29 percent to $6.81 billion, while unit sales increased 17 percent to 231,000 in the three-month period.


Full-year records
For the full fiscal year ended March 31, net income climbed 73 percent to $2.01 billion. Operating profit nearly tripled to $3.18 billion.
Revenue advanced 26 percent to $23.44 billion, while annual sales rose 14 percent to 825,000 units.


In North America, which accounts for almost 60 percent of Subaru's global sales, volume notched the biggest gain of any major market, a 22 percent increase to 478,000 vehicles.


Looking ahead, Yoshinaga said North American sales should add another 11 percent to end this fiscal year at 531,000 units.


The brand is looking for a new U.S. marketing boss. Last week Dean Evans, who led the marketing efforts since September 2011, announced his departure. Alan Bethke, vice president of marketing, will serve as interim head of the department “until the company announces its longer-term strategy to replace Evans,” the company said last week.