Subaru's Sales Success Comes With a Big Side of Trouble
Subaru’s sales in the United States effectively tripled in the past decade, making it the most important market for the brand by a wide margin. However, the automaker has had to expend quite a bit of energy in its home country of Japan to address recalls and regulatory scandals over the last few years.
While the duality hasn’t caused issues on a global scale, many observers wonder how long its good fortune will last. In America, Subaru is a feel-good brand that uses love as a core marketing concept to improve sales. In Japan, it has become synonymous with overworking employees lacking compensation, regulatory scandals, sudden work stoppages, and recalls. Many believe it’s only a matter of time before Subaru of America will have to contend with Japan’s issues, and evidence exists that problems are already beginning to surface in the West.
According to internal documents intercepted by Automotive News, certain U.S. Subaru retailers and company managers at starting to fret. With the next-generation Outback crossover slated to launch later this summer, some dealers worry it could be a repeat of the Ascent.
“We continue to be concerned that [Subaru] is not making the necessary investments and changes fast enough to ensure that vehicles are being produced with the quality the brand and its customers deserve,” Subaru’s U.S. National Retail Advisory Board wrote in a September 18th resolution to top management in the U.S. and Japan after last year’s rollout of the U.S.-built Ascent crossover was maligned by recalls. The board also noted it “would like to express its disappointment with the continued poor product quality and with the poor launch of the new Ascent.”
From Automotive News:
Tom Doll, CEO of the automaker’s U.S. subsidiary, Subaru of America, acknowledged in an interview last week at the Chicago Auto Show that dealers had expressed concerns to Subaru in Japan. But Doll indicated that whatever challenges exist will be worked out, and he said he expected no delay in any product launch.
“This situation is going to correct itself,” Doll said. “A lot of it’s growing pains, right? … But we’re not concerned at all about whether or not it’s going to get fixed or not. It will get fixed. We’re hopeful that it gets fixed fairly quickly.”
However, the situation appears to be more serious than that in Japan. Subaru made big headlines in Asia after a veteran employe jumped off the roof of one of its Japanese facilities after working 105 hours of unpaid overtime in a single month. According to the family’s attorney, Kazunari Tamaki, the man’s death can be directly attributed to pressure in the workplace. The local Labor Standards Supervision Office even ruled the suicide a case of “death by overwork,” or karōshi.
Late last month, Tamaki held a press conference to describe the man’s final moments and pressure Subaru for damages. This resulted in the automaker acknowledging that some of its facilities compelled thousands of employees to work overtime without pay to solve regulatory problems and bolster production for the North American market — forgoing millions of dollars in the process.
Subaru says the suicide spurred it to survey the overtime practices of roughly 17,000 employees between July 2015 and June 2017. It learned that about 3,400 workers performed unreported “service overtime,” often claiming they did so due to management pressure not to exceed internal limits on overtime. Last March, Subaru retroactively paid those workers to the tune of $7.03 million, which some claim was insufficient.
“There is a corporate mentality that you shouldn’t claim overtime,” Tamaki explained. “There’s a deadline for the work assigned, and you have to meet that deadline at all costs. I think it’s really the company trying to make a bigger profit by controlling costs.”
Back in the United States, dealers remain concerned that Japanese problems will spill over. “Unfortunately, customers continue to have many issues with their Subarus, and the brand continues to slip in IQS and other industry metrics related to product quality,” the retail board wrote in September. “This is unacceptable and contradictory to what [Subaru] continues to tell the [board] and retailers about improvements being made thru quality initiatives.”
Production volume has also become an issue. One U.S. supplier to Subaru’s vehicle assembly plant in Lafayette, Indiana, already confessed to having trouble keeping its quota as the redesigned Outback enters pre-production. The supplier, Fukai Toyotetsu Indiana Corp., had 222 workers quit from its plant in Jamestown between May and September, losing 74 more between early December and early January. This left the stamping supplier short staffed and dependent upon 12-hour shifts to make up the difference.
None of this will bankrupt Subaru overnight. While the company has adjusted its earnings slightly to account for work stoppages and supply issues, it doesn’t look to be anywhere near death’s door. The automaker will probably continue growing until logistics becomes an insurmountable problem. All Subaru seems to have done is run itself to exhaustion without taking a break to reassess the situation — a mistake we hope it doesn’t repeat.
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