Can't Buy Me Love: Subaru in AmericaHouston, Texas, June 2007 Subaru of America is the US automotive division of Fuji Heavy Industries Co., Ltd. (FHI). Subaru makes good all-wheel-drive vehicles but, with sales of about 200,000 vehicles annually, has not achieved sufficient US market penetration for the critical mass needed to prosper. The brand occupies a position not unlike Jeep, a value based all-wheel-drive niche product. The marque, despite averaging around 4% annual sales growth, has only 1.2% of the US market. The company needed to broaden its base for a move upmarket, becoming more car like, without alienating its core (back-to-basics baby boomers and off-road rally enthusiasts) customers. To compete outside the snowbelt, Subarus needed to directly confront Honda, Toyota, and VW. Bigger, stylish, more comfortable vehicles, with better perceived quality and ergonomics, were required. Another marketing campaign seemed in order. The iconic little cars have always been difficult for Madison Avenue to hype. Paul Hogan (Crocodile Dundee) did a good job, but hasn't done a sequel in years. The newest ads focus on the company's "green" values, featuring the recycling and wildlife habitat at their Indiana facility. Cue Bambi, deer scene take 3. Corporate Culture
Headquartered in Cherry Hill, NJ, Subaru of America was previously twenty percent owned by General Motors Corporation. Subaru may have been a little nervous when General Motors put the shares up for sale, but Toyota quickly grabbed 8.7%. This vote of confidence says "here's one tier three Japanese automaker that will still be around." Subaru QualityJD Power Initial Quality Survey for 2006 awarded 25 stars out of 40, just above average. For comparison; In the J.D. Power and Associates 2006 Customer Retention Study, Subarus ranked a strong 11th out of 37 makes. An above average 51.1% of those surveyed returned to purchase another vehicle. Consumer Reports likes all the Subarus, with "recommended" ratings on Tribeca, Forester, Impreza, Legacy, and Outback. The cars garner lots of NTSHA 5-star crash tests. Among Insurance Institute for Highway Safety (IIHS) top safety picks; Legacy, Tribeca, and Forester. For the SUV's, the boxer power train provides a low center of gravity and thus good rollover resistance. The plant at Lafayette, IN, now has shared production with Toyota Camrys, which implies higher quality. The Subarus weakest area is fuel economy, with the company's best, Legacy, at EPA 28 highway. This will not be competitive in the coming "Strait of Hormuz has been closed" scenario. AWD systems add cost, weight, and power train friction losses: fuel wasters. Full time AWD notwithstanding, car companies not up on fuel economy will be on the endangered list. New Corporate Average Fuel Economy (CAFE) legislation will soon mandate 35 mpg at least. Depreciation is low, besting Japanese third tier competitors Izusu, Mitsubishi, and Suzuki. Automotive Lease Guide (ALG) ranked Subarus third in non-luxury brand residuals, behind Honda and Toyota. Owner loyalty rates are high. With horizontally opposed "boxer" power plants and symmetrical all wheel drive, Subarus cannot be accused of lack of engineering originality. In a world full of rebadged built-alikes, this counts for something. But but can the cost of hybrid technology, where the company lags the leaders, hydrogen fuel cells, and electronic safety gizmos, be effectively amortized with only 200k in sales? Dealer NetworkAround 600 dealers nationwide sell Subarus, with 270 exclusive franchises. Fuji Heavy plans to expand its network to 621 Subaru dealers by 2010, focusing on expansion in sunbelt states where all-wheel-drive is not a necessity. There are 11 dealers in Texas, located in the major urban areas. Supply/DemandThese are pretty good cars, but are priced higher than the other tier three Japanese competitors. The question for customers outside the company's traditional base (snow belt and mountain areas) is: do you really need all wheel drive? End Subaru of America Brand Review, goto Sitemap
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