Subaru Betting on Japanese Production

SubaruSubaruJapan, 1953 > present34 models
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is making a big bet on its home country. It is planning to increase Japanese production this year to 78% of its global production, up from 73% in 2011. This is despite Subaru selling most of its models in the US and a strong yen and weak US dollar hurting profits. It is the only major Japanese automaker with plans to expand in Japan this year. 

"A large-scale expansion in the U.S., where we build new factory buildings and such, will cost a lot. We're not like Toyota, Honda or Nissan, so it's not appropriate for us to make sudden, big investments," said Subaru Chief Financial Officer Mitsuru Takahashi.

Subaru makes a larger proportion of vehicles domestically than any of the Japanese automakers. It will build about 600,000 cars in Japan in March compared to about 200,000 in the US in the same period.

ToyotaToyotaJapan, 1937 > present155 models
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and HondaHondaJapan, 1948 > present102 models
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are building more production into North America, and NissanNissanJapan, 1932 > present159 models
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is betting on South America and Central America. 

The yen is beginning to weaken. It has lost 2% of its value in the last six months. However, Japan did relatively well during the global economic crisis. From 2008, it gained about 40% in value. Subaru's parent, Fuji Heavy Industries, says that for every one yen increase in value against the dollar, Subaru loses $82 million, and against the Euro it loses €4 million. Comparatively, a new factory in the US would cost around $1 billion. 

Subaru has to increase capacity to deal with rising demand from North America and China. Earlier this year, it was denied permission to build a factory in China making it the only major Japanese automaker without one there. However, it does export vehicles to China and demand is rising. 

"I'm hoping for the yen to further weaken, and I'm hoping that five to 10 years down the road it will be weaker," said Takahashi.

Source: Automotive News