By on May 27, 2012

Rather than expand production in North America, Subaru is taking a contrarian route and expanding their manufacturing in Japan – even as everyone is scrambling to get out.

According to Automotive News

“A large-scale expansion in the U.S., where we build new factory buildings and such, will cost a lot,” Chief Financial Officer Mitsuru Takahashi said in a May 18 interview in Tokyo. “We’re not like Toyota, Honda or Nissan, so it’s not appropriate for us to make sudden, big investments.”

The move comes with a planned 28 percent boost in Japanese output by March, 2013 while cutting U.S. output by 1 percent. Subaru is betting that a weakening yen will help increase profitability – Takahashi’s own outlook is of a drop in the yen over the next decade – but as of now, Japanese automakers can’t build North American factories fast enough.

Subaru recently lost a bid to begin a joint venture with Chery in China, and will now be forced to import cars and face a 25 percent duty on each one. That resulted in Subaru shifting their focus to American, where the brand has seen strong growth. Although Subaru has a U.S. manufacturing presence (and Subaru decided that, even with the strong yen, it’s more cost-effective to expand in Japan) an erratic yen could wreak havoc on Subaru’s profitability, ala Mazda – but  by the same token, Subaru’s bet on a weaker yen could also pay off handsomely. The nature of the auto business in today’s world is that long-term decisions must be made in a world where events like last year’s tsunami can turn one’s world upside down in a very short time frame. We’ll just have to sit tight and watch how Subaru’s bet pans out.

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6 Comments on “Subaru Increasing Japanese Production Despite Exchange Rate Fears...”

  • avatar

    Subaru is selling essentially one assembly plant worth of units, after being in the US for over 40 years.

    Not a lot of risk, no matter what they do.

  • avatar

    That car is probably the cutest car in the world.

  • avatar

    I suspect their choice is renovating existing facilities, their own, Toyota’s, or their parent company’s, versus a brand new plant in the U.S.

    Exchange rate risk can probably be managed by importing parts from China, Thailand, or the U.S./Mexico. It’s not like they don’t have empty ships crossing the Pacific westbound.

  • avatar

    I’ve been in car museums where some of the cars are up on jackstands to unweight the suspensions, but those were a bit older and rarer than a Subaru 360. It’s rather remarkable how some museums go out of their way to make it hard to take nice photos of their cars.

  • avatar

    a lot of them probably are on loan.

  • avatar

    “Rather than expand production in North America, Subaru is taking a contrarian route and expanding their manufacturing in Japan . . . ”

    Subaru is expanding NA production, announcing just two weeks ago that they were investing $75 million in the Lafayette, IN facility, adding 100 jobs etc. to allow 24,000 more vehicles to be built annually. Even Gov. Mitch Daniels attended the announcement.

    Business Week:

    Indianapolis Star:

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