By on November 2, 2016

2016 Subaru Outback

It was a bombshell decision that Fuji Heavy Industries describes as “extraordinary.”

Subaru’s parent company announced today that its board of directors has decided to eliminate its industrial division to free up resources for its car division. FHI built its empire on small industrial powerplants, spawning a quirky car company in the process, but that car brand is now the corporation’s main focus.

What does the new love mean for Subaru?

For starters, the automaker must decide what it wants to be.

By closing the last page on a book that started in 1951, FHI will no longer build engines for construction, industrial, and agricultural equipment, nor will it make any powerplants for snowmobiles, ATVs, pumps or generators. Production stops on September 30 of next year. Meanwhile, FHI’s aerospace division lives on.

Two years ago, FHI launched a strategic vision to bolster the car division, sending more personnel to Subaru’s engineering and product development division. Next April, the FHI name will cease to exist, replaced by a new moniker: “Subaru Corporation.”

That tells you something about the car division’s long-term importance. FHI claims that dropping the industrial division allows it to move resources to “more effectively to enhance the competitiveness of its core automotive business in the aim of achieving sustainable growth in the future.”

The key word in that statement is “sustainable.” Subaru is notoriously averse to overproduction, which seems odd given that it currently sells all the cars it can build. FHI president Yasuyuki Yoshinaga recently told the Wall Street Journal that he’d rather have a vehicle shortage than an oversupply, admitting that the level of caution is unusual for the industry.

Blame the U.S. for the increased demand, as it gobbles up 60 percent of the company’s volume.

Global sales rose 8.4 percent in the first nine months of 2016, while Japanese sales sank by 8 percent. While its Indiana assembly plant is expected to double in capacity to feed Impreza, Outback and Legacy models to a hungry America, most of its manufacturing capacity remains in Japan. No new factories are planned there, and a year ago, FHI president Yasuyuki Yoshinaga announced a production cap of 1.03 to 1.1 million vehicle per year. Through the end of September, global production increased 7.9 percent (mostly due to the Indiana plant), for a total of 751,562 vehicles.

Where Subaru suffers in certain overseas markets, Europe especially, boosting production and hoping the vehicles sell isn’t Subaru’s game plan.

“While (the industrial products division shutdown) doesn’t help us with capacity, in that it doesn’t take up line space…it does help the company focus its financial resources on automotive,” Michael McHale, director of corporate communications for Subaru of America, told TTAC.

Much of that newfound money will no doubt go into developing new products and technology. Subaru needs the goods — and the strategy — to compete in new or underperforming markets before it lifts the production cap and builds new factories. If Subaru does decide to ditch its niche brand status, it can’t go into battle with an unloaded gun.

[Image: Subaru]

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64 Comments on “Subaru’s Parent Kills Industrial Division, Plans to Coddle Its Overachieving Child...”


  • avatar
    Syke

    Which takes one of Honda’s competitors out of the mix.

  • avatar
    Corollaman

    Perhaps now they have enough resources to engineer their way out of their problematic head gasket issues.

    • 0 avatar
      Dave M.

      I think you’re about 10 years late to the party.

      Personally I think they should concentrate on melding Papa Toyota’s mid-size hybrid system to the next Outback, a true mini-van vehicle, and an AWD mid-size pickup.

    • 0 avatar
      EAF

      Subaru traded their head gasket issue for oil consumption & bearing issues. I guess I would prefer the head gasket issue myself.

      • 0 avatar
        Steve Biro

        Oil consumption problems were solved with harder piston rings. I’ve seen absolutely zero oil usage with my 2016 Forester. Ditto for a friend with a 2015 Crosstrek with the 2-liter engine. For that matter, I never had head gasket issues with my 2001 and 2010 Imprezas, both of which I drove for well over 100-thousand miles. So go figure.

        • 0 avatar
          MeJ

          Glad to hear that. I just bought a 2016 Crosstrek. Love it so far.

        • 0 avatar
          EAF

          With regard to “harder” oil control rings, could you point me to a credible source? I’d be extremely interested in reading about it. I know new shortblocks are being offered for those who fail a consumption test, but no clue as to what changes were made to the assembly itself.

          Stories of 2015’s suffering from oil consumption are all over the web. Do you use 0w-20? Mileage on your Forester? Oil change interval?

  • avatar
    sirwired

    This reminds me of when Westinghouse, a proud firm responsible for much of modern America’s electrical infratructure, crippled itself with typical Wall Street financial engineering, bought CBS, and decided they really didn’t care too much all that hard science-y stuff any more, and went on to make a string of overpriced acquisitions which were paid for by looting the industrial parts of the company.

    • 0 avatar
      SCE to AUX

      Cars must be more profitable than industrial engines – sad.

    • 0 avatar
      Kenmore

      Bravo. I too think Subaru is the gifted child the rest of the family will kill to exploit.

    • 0 avatar
      Xeranar

      Technically Westinghouse was a major conglomerate that functionally IS CBS. It didn’t really ‘loot’ itself so much as divest nuclear tech and other dying industries for the television industry which was and is a smart move given the trajectory their work took.

      It’s a bit odd to use Westinghouse as an example of scorn since they’re doing fine.

      • 0 avatar

        Westinghouse bought CBS in 1997 and decided to become a pure media company. Then they changed their name to CBS, although they control the rights to the Westinghouse name, logos, etc.

        Remember, Westinghouse sold off its consumer product lines decades before the change to CBS. I think nuclear reactors and maybe one or two other things were all they had left, those non-media assets were spun off.

        The Westinghouse name, logo, and “you can be sure if it’s Westinghouse” slogan are appearing again on an increasing number of household items. But those items are made by companies with no relation to CBS beyond the licensing fees they pay for use of the Westinghouse brand.

  • avatar
    SCE to AUX

    I’ll consider a Subaru when they re-introduce the inline engine.

    • 0 avatar
      brn

      I won’t consider them until they change their marketing strategy. When your primary sales pitch is “love”, I’m clearly not part of their target demographic.

    • 0 avatar
      993cc

      I’ll consider Subaru if they make AWD optional again, or at least offer a part time, manually switchable system. I don’t need AWD, and I live in Canada. I can’t imagine why someone in the southern U.S. would pay the extra purchase, maintenance, and fuel costs.

      But at least they still sell a wagon, sort of.

      • 0 avatar
        focus-ed

        VW is the last to offer affordable true wagon with no liability of AWD. Similar reliability, likely worse depreciation (nobody that buys to keep cares much for this) and much better fuel economy and driving dynamics.

      • 0 avatar
        kuman

        I beg to differ, the AWD system in my subaru can be felt even on regular speed 100-120KMH, especially during heavy rains.

        I live in a 3rd world tropical country. our roads n highways although are made of concrete and asphalt are far from smooth, few holes, and road undulations, not to mention water puddles.

        FYI. hitting just a few cm deep of water on highway speed isnt fun in anyway.

        Compared to other cars that i personally have driven trough the rain, subaru gave me much better feel.

        • 0 avatar
          heavy handle

          Ironically, that’s why I got rid of my Impreza wagon many years ago. The AWD system could be felt at speed, and it wasn’t good. In heavy snow (not something you get in a 3rd world tropical country), the car would shimmy as traction moved from front to back and back to front. It was tiring and stressful because you constantly had to micro-correct with the steering.
          I replaced that car with a FWD Saab which was much more stable in difficult conditions (and in normal conditions).

          Neither car ever got stuck in the snow, so I don’t think the AWD provided any benefit.

          Overall the Saab was a clear winner: better speed (100 more HP), better economy by about 15%, better reliability, lower maintenance costs, more room inside (Sub wagon vs. Saab hatch), better seats/interior quality, much better rust resistance.

    • 0 avatar
      FormerFF

      I suppose there are some packaging advantages to a horizontally opposed engine when it’s being mounted longitudinally, and that’s why Subaru does it. Other than than, a horizontally opposed engine is an unnecessary complication in a front engined car.

  • avatar
    Corollaman

    Does anyone know why Fuji went with the boxer engine design?

    • 0 avatar
      Nick

      I think they bought it helped with their compact front drive drivetrain in the early 60’s when various manufacturers were using air cooled boxer 4’s. Later on they realized it worked well with their AWD system and for marketing with all of it’s symmetry.

    • 0 avatar
      Dave M.

      Compactness would be my guess. Low hoodline yet 8″+ of ground clearance.

    • 0 avatar
      SCE to AUX

      The rhetoric was that it improved packaging, lowering hood height and center of gravity, and simplified their AWD setup.

      I call BS on that argument. Look at the hood height and (apparent) CG on the car in the photo – same as any other. Their opposed engines are a nightmare to service, and one bad head gasket means an engine overhaul in order to maintain balance in the boxer universe.

      http://st.motortrend.com/uploads/sites/5/2016/02/2016-Subaru-Outback-25i-Limited-engine.jpg

      Volvo managed to get a turbo 3.0 I-6 to fit *transversely* with their last-gen S60 AWD. For that feat, they forever have my respect as a design engineer.

      https://www.thetruthaboutcars.com/wp-content/uploads/2012/02/IMG_5492.jpg

      • 0 avatar
        Scoutdude

        Actually Subaru went the boxers back in the day of the FF-1 which was not available with a driven rear axle. Since they stacked the spare on top of the engine there was no lowering of the hood line. 4WD was a later thing and it was certainly made much easier with the longitudinal layout. However that was nothing new, as others had that layout before Subaru switched to putting engines in the front of their vehicles.

      • 0 avatar
        jose carlos

        Speaking of “respect as a design engineer”, one should never forget another I-6 transversely mounted:
        https://autopolis.wordpress.com/2012/03/14/1975-1981-bl-princess-a-horse-without-a-name/

      • 0 avatar
        ThirdOwner

        After looking at the pictures you referenced I had the exact opposite impression. Subaru engine bay is clean, uncluttered, and has ample space to get to the bits in need of servicing. It is also a longitudinal design. All the good qualities in my book.

        The Volvo squeezing a 6 cyl transversely to drive the front wheels, with a blower on top, is the stuff of my nightmares.

        • 0 avatar
          bhtooefr

          Although, a longitudinal design is inherently less efficient at driving the front wheels, due to power going through more stages of gearing, including at least one bevel gear, to get to them. (It’s more efficient at driving the rear wheels, however, as it only goes through one bevel gear, instead of two in a transverse setup.)

    • 0 avatar
      2manycars

      Subaru was inspired by the 1959 Borgward/Lloyd Arabella 900cc water-cooled boxer engine. This was a front-drive car and the drivetrain does look much like the early Subarus. (Some say Fuji actually bought the rights to it and used the Arabella engine in their prototypes.)

      http://s71.photobucket.com/user/xtsub/media/Borgward_59_Arabella_Engine.jpg.html

  • avatar
    Lou_BC

    I always thought diversification was the key to long term financial stability?

    • 0 avatar
      Sjalabais

      …especially in the mind of Japanese and Korean business folks. Interesting development, this one!

    • 0 avatar
      heavy handle

      For an individual, diversification is good. For a company, not so much. The viable businesses end-up subsidizing the lame-duck businesses, and nobody benefits. The usual solution is to spin-off non-performing businesses, in the hope that a more focused management team can save them.

      • 0 avatar
        JMII

        True… but this still seems short sighted. What if the car division suffers some massive problem (airbags, diesel-gate, gas price fluctuations, etc). Then who will be left prop them up? Industrial engines seems like a long term winner, while auto sales swing massively on much smaller time scales. For example just a few years ago Hummer was a thing.

        However if this gets us an updated BRZ with a turbo I’m OK with it :)

  • avatar
    tylanner

    Large OEM relics from decades past must transition from their bread and butter at some point. Anything with Heavy Industry or similar in the name has likely been on a steady downward trend since the late 70s. The fairly steady stock price today shows the strength of Subaru.

    Some become so obsessive with conserving their business that they hemorrhage with acquisitions and spin out of control trying to manipulate market forces instead of making good products.

  • avatar
    genuineleather

    It’s telling that Subaru isn’t selling the division but ceasing operations, indicating that not only is it not profitable, it’s not viable. A business has to be extremely far gone for it to be worth nothing to potential buyers. Most Japan Inc businesses are a muddle of top-shelf, profitable product lines that subsidize negative margin commodity divisions kept alive out of tradition, complacency, and corporate pride. Subaru bucking this policy is not something to lament.

    • 0 avatar
      Scoutdude

      That was my question just how messed up is that division that it is better to close it. Is the brand irreparably damaged and the products so noncompetitive that they have zero value. Sure they are keeping the plants in this deal but if there was any value in the division selling it lock stock and barrel should yield more than the value of the plants. Many of those plant will need some level or another of retooling to produce automotive components or be converted into an assembly line.

      • 0 avatar
        kuman

        i think honda small engines eats up its marketshare. especially in 3rd world country where it sells the most.

        Recently i almost never heard of robin ( subaru small engine ) powered anything from genset, water pump and farm equipment

        Most of those small equipment now using licensed honda or outright bought whole engine from honda. especially since honda has for a long time now have a factory in china as well as partnership with several Chinese companies.

        there used to be varieties of engine brand available, but i think now it has far reached over the tipping point where almost all powered products now either uses honda, licensed honda or just clones of it.

  • avatar
    Xeranar

    Looking over their website and wiki page it seems they were largely out of the engine game anyways. This seems like a quiet ending to a dead end. They’ll continue to make aerospace products which is profitable and cars. Not exactly wild news if you look at what they’ve been doing with their business over the last two decades.

  • avatar
    dukeisduke

    Instead of killing it, why not just spin it off? Or is there too much Subaru technology in them that they don’t want to release to someone else?

  • avatar
    markogts

    Memo for Subaru’s managers:

    If you wonder why you don’t sell well in Europe, just check your engine palette. On an Outback we have:
    -2.0 flat four gas, underpowered beyond any imagination.
    -3.0 flat six gas, only coupled with auto transmission. No hope where gas is 6$/gal (now that is cheap, I mean)
    -2.0 flat four diesel. Introduced: 2009. Latest update: 2009. Power when introduced 147HP. Power of current release: 147HP.

    Now, please, as a fan of this brand: don’t miss the next wave. Prepare a good plug-in hybrid.

  • avatar
    indi500fan

    My 1997 Polaris ATV (bought new) has a Subie one lung 2-stroke motor.
    It has served faithfully, I consider the entire package to be top shelf equipment.

  • avatar
    jalop1991

    damn. 20 years ago, I had a 26″ lawnmower with a Subaru Robin engine. Best damn small engine in the world.

    • 0 avatar
      kuman

      i think honda small engines eats up its marketshare. especially in 3rd world country where it sells the most.

      Recently i almost never heard of robin ( subaru small engine ) powered anything from genset, water pump and farm equipment

      Most of those small equipment now using licensed honda or outright bought whole engine from honda. especially since honda has for a long time now have a factory in china as well as partnership with several Chinese companies.

      there used to be varieties of engine brand available, but i think now it has far reached over the tipping point where almost all powered products now either uses honda, licensed honda or just clones of it.

  • avatar
    davew833

    I prefer Subarus because they ARE easy to service. Ever tried to replace an alternator or an AC compressor on a Camcord? Change a timing belt on a transverse-mounted engine with 2″ of clearance between the front of the engine and the inner fender? Not fun for us big-handed folks! On a Subaru, the belt-driven accessories are right on top and pulling the radiator gives plenty of space to service the timing belt. Even swapping an engine can be done in about half the time. Granted, spark plugs can be difficult to change, valve cover gaskets usually leak, and the whole head gasket issue is excessive.

    • 0 avatar
      gtemnykh

      Well summed up Dave! There are definitely pluses and minuses. One additional minus that I think is worth mentioning is that the flat-4 longitudinal layout places hot exhaust manifolds awfully close to the CV axle boots, which cooks them over time and leads to premature failure. And speaking of valve cover gaskets, having the valve covers low mounted like that leads to salt spray and other gunk to make its way onto the valve cover bolts and corroding the heck out of them, making for a “fun” extraction process.

  • avatar
    tedward

    I’d be pretty optimistic about this if I worked for subaru. They are a break through brand now in this market, and they’ve done it so far without keeping up with the joneses. That can not last.

    An ev/hybrid investment is the least of what they need. Their gas and overseas diesel engines, and their transmission pairings, deserve substantial developement.

    Or they could be preparing for a merger/to be bought out. That’s just as likely and would yield the same benefits.

  • avatar
    Jeff S

    I hardly ever see a Subaru engine in power equipment until recently. Some of the power washers, DR Trimmer mower (optional on higher models), and a few commercial mowers. Honda, Kawasaki, Briggs and Stratton, and Kohler for the most part have the market to themselves. I have never had Subaru powered equipment but they have a reputation for having an excellent small engine. I would have to agree with many that the industrial and power equipment business is not as profitable especially since the equipment manufacturers bid for the lower cost engine. Tecumseh, a manufacturer of power equipment went out of business on February 2009 and sold certain assets of its engine business to Certified Parts Corporation, including all existing and unfinished engine parts inventory, tools to make finished product and certain intellectual property assets.

  • avatar
    Pete Zaitcev

    Thank heavens for Kawasaki, I guess.

  • avatar
    formula m

    Fuji Heavy Industries is changing over its branding of all products to Subaru and focusing on the Subaru name to define the entire company going forward.

  • avatar
    brenschluss

    A few months ago Costco was blowing out Subaru-branded power washers and lawn mowers, Rally Blue cladding and all. I was wishing I had use for either of those at the time because they looked OK and the price was right.

    I honestly had no idea Subaru even made small engines until this article, so I was baffled when I saw these. Makes more sense now knowing that this may have been their bread and butter at one time. I never looked into the “Heavy Industries” part of FHI, figured they made cranes or large generators or something, to be used in faraway countries, or rebranded before being sold in the US.


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