Toyota Essential To Subaru Growth

Independence will mean some borrowing.
by Paul A. Eisenstein (2007-04-11)


Without Toyota there would likely be no Subaru, the smaller Japanese automaker's new CEO acknowledged during an interview with TheCarConnection.com. But don't expect Subaru to become little more than another Toyota division, stressed Ikuo Mori.

The automotive arm of Japan's Fuji Heavy Industries has some big ambitions, underscored by a series of significant product launches at the New York International Auto Show, including a restyled Tribeca crossover vehicle and the next-generation WRX. Both models underscore what Fuji CEO Mori described as Subaru's increasing "focus on Southern California."

But the U.S. , overall, is the carmaker's most important market and, if Subaru meets its goals, will see sales surge 15 percent over the next three years, from 200,000 to 230,000. In turn, that should help boost global volume to 635,000 during the same period.

Getting there won't be easy, Mori acknowledged, in an era of increasing competition. Part of the challenge is to clearly define what Subaru stands for, what the company describes as the "Subaru experience." Ironically, to achieve that goal, Fuji will be increasingly reliant on its ally, Toyota.

That partnership was launched last year after Subaru severed ties with General Motors. "The reason we stopped that alliance with GM was because of their own difficulties," said Mori, adding "the result were not good with GM."

Sources tell TheCarConnection.com that the two former partners simply couldn't come to terms on a variety of potential product programs. At one point, for example, GM considered using a Subaru platform and its well-respected boxer engine, for the Pontiac Solstice. In the long run, the U.S. maker developed its own small platform and turned to an existing GM engine.

The collapse of the General Motors deal left Fuji wondering whether it could survive on its own, or would need "to make a new alliance," said Mori. "In the long term, we think it would be difficult to survive by ourselves without the Toyota alliance."

That new partnership has already begun to pay off. The bigger maker, desperate for more production capacity to supply a hungry U.S. market, has begun sourcing Camry sedans from the Subaru plant in Indiana . The factory was originally built in partnership with Isuzu, which later abandoned passenger car production and pulled out of the deal, leaving Fuji/Subaru with a sorely underutilized plant.

Toyota will likely provide some product for Subaru, in the long run. And it will also help expand the smaller maker's powertrain lineup. Subaru has abandoned its own hybrid-electric vehicle program and will instead use Toyota technology, Mori noted.

"We are a small player and cannot focus on many projects," he noted. "So we will focus on our core…and draw from Toyota elsewhere."