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Subaru still considering Indiana plant expansion

December 5, 2012

Fuji Heavy Industries Ltd.’s Subaru unit is studying whether to expand its Indiana auto-assembly plant as the Toyota Motor Corp. affiliate seeks to boost U.S. output to curb currency losses and meet growing demand for its models.

The U.S. unit and its Tokyo-based parent are in discussions to expand the Lafayette factory, Tom Doll, Subaru’s U.S. executive vice president and chief operating officer, said. A decision whether the plant will add assembly of Impreza cars or Forester crossovers hasn’t been made, he said.

The plant has about 3,600 workers.

The combination of a high yen and expensive shipping costs means “it becomes more difficult with production in Japan to import those vehicles into the United States,” Doll said. “At some point a decision could be made to bring further production to the United States,” he said, without elaborating.

Fuji Heavy joins Japan’s Toyota, Honda Motor Co., Nissan Motor Co. and Mazda Motor Corp. in seeking further production capacity in North America to stem losses related to the yen’s persistent strength relative to the dollar. The U.S. currency’s value has fallen about 25 percent against the yen in the past five years, eroding the value of rising U.S. sales.

“With strong exposure to the U.S. market, Subaru sales have benefited not only from the healthy recovery in the U.S. market but also market-share gains supported by new models,” said Ashvin Chotai, London-based managing director of Intelligence Automotive Asia. “The current rate of growth justifies a more aggressive capacity expansion plan for North America.”

Demand for Subaru’s all-wheel-drive cars and light trucks has risen 29 percent this year, to 299,788, capped by a 60-percent sales increase in November. Production at Lafayette should reach a record 277,835 vehicles this year, said Jennifer McGarvey, a spokeswoman for the factory.

Fuji Heavy stock has jumped 99 percent this year for the biggest gain on the Nikkei 225 Stock Average.

The Lafayette plant opened in 1989, initially as a joint venture with truckmaker Isuzu Motors Ltd. It currently makes Outback wagons, Legacy sedans and Tribeca sport-utility vehicles as well as Camry sedans for Toyota under contract. The factory can produce a maximum of 310,000 vehicles annually, based on state air- pollution limits, McGarvey said.

A decision on the expansion is possible “within the next few months,” said Michael McHale, a company spokesman. At least 50,000 units of production capacity would be added if Impreza or Forester production moved to Indiana, he said.

Subaru owns enough land at the Indiana site that “we could probably add a second full factory,” Doll said.

Subaru’s U.S. sales unit is based in Cherry Hill, N.J. Toyota City, Japan-based Toyota owns 16.5 percent of Fuji Heavy.

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