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Subaru's fortunes sinking - can they turn it around?

nippononlynippononly SF Bay AreaPosts: 12,687
edited May 4 in Subaru
Subaru is on the back side of a five year revitalization plan that so far has produced anything but. An article at Autoweek today gives a good summary:

Basically, back in 2002, Fuji Heavy Industries (FHI), the Japanese corporation that owns Subaru, set goals for sales and income increases it hoped to achieve at Subaru by March 31, 2007 (the fiscal end of a five-year period). it was also during this period that Subaru announced the goal of moving upmarket over the next few years to become more of a premium brand.

Instead, sales have stagnated and, worse yet, income has fallen sharply. Subaru accounts for 90% of FHI's global revenues (I had no idea it was that high). Subaru expects sales in North America to be about 201K this fiscal year, as opposed to its original goal of 250K. It is hoping that the launch of the new Tribeca will boost those numbers a little. But it cannot be a good sign that its most popular model, the Outback, was completely revised last fall, and yet sales have not increased but rather have remained flat. Other models (Forester and Impreza) are at the very end of their model cycles and will not be completely revised for more than a year.

As for income, SIA (the Subaru plant in Indiana) lost $74 million last year and is on target to lose more than twice that much this year. Meanwhile, GM waits in the wings, already owning 20% of the company and perhaps willing to take a more active role if it perceives the company is performing weakly.

Can Subaru turn it all around? I truly hope they are not selling rebadged Trailblazers in 2010.

2013 Civic SI, 2009 Outback Sport 5-spd (stick)



  • jeffmcjeffmc Posts: 1,742
    Over the past 15 years, Subaru has doubled their number of vehicles sold in the U.S., and their product keeps getting better and better... and keeps getting better reviews. It takes time for positive press to affect the carbuying public and for Subaru to become more of a household name. You can bet many more people are considering Subaru than in the past, but it takes many years of quality production to reach that critical mass when it stops being an uphill struggle just to get average Joe/Josephine to think of Subaru as an option when shopping.

    They need to be getting that good press at least through a 5-year purchase cycle. Doesn't do much good to see a great Subaru review today, but then see nothing for the next 3 or 4 years when it comes time to purchase a car. Heck, neither of my mid-sized hometown paper's two automotive reviewers have even received an '05 Outback or Legacy to review, and this is a Subaru stronghold.

    Think of the Field of Dreams - build it (with style and quality) and they will come.

    Also, to pick a nit, Outback wasn't "completely revised last fall"... it was about a year ago.
  • nippononlynippononly SF Bay AreaPosts: 12,687
    It is true that Subaru's sales have increased a lot since 1990, which was the depth of their doldrums and around the time they almost went bankrupt. But since the major sales resurgence that began around 1995, not coincidentally with the debut of the Outback, sales have peaked and then plateaued.

    1995 was 10 years ago - two car generations ago and longer than the average Joe or Josephine keeps a car before buying a new one. The press have always liked the Outback, and LOVED the WRX. Safety results have been strong, especially with Forester. Basically, Subaru has been doing most of the important things right, and yet this cycle of increasing brand recognition you refer to doesn't seem to be happening.

    Heck, what you said is true - it was more like last SUMMER that Outback was redone. Not only that, GM's input has led to some of the best financing deals on Subarus in the last year that Subaru has ever offered. Both of which make it MORE significant that sales have not risen in that time.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • rshollandrsholland Posts: 19,661
    Subaru here in the USA just had their best April ever in terms of sales. The redesigned Legacy and Outback have been a clear success, and everything looks good for the new B-9 Tribeca, as there is a lot of interest in that model. The Forester and Impreza are getting major facelifts for '06 too.

  • sweet_subiesweet_subie Posts: 1,394
    the question is NOT sales but the margin. high-end legacys/outbacks are 3-4k off MSRP now within a year of introduction.
  • nippononlynippononly SF Bay AreaPosts: 12,687
    when you say that Legacy and Outback have been a clear success, I am not sure what it means. Sales did not rise when the new models were introduced. Do flat sales indicate a clear success? The new Outback is the first one ever where I recall dealers running ads in the paper within a month or two of launch with discount deals for "all in stock".

    Forester is getting a prettier face and little else for '06, from what I understand. Impreza gets a new face too, but this is not a major model revision, which isn't due for another year for this model.

    As for Tribeca, yes, everyone from Sube execs to fans is banking on it drawing good sales. I hope it does. It is entering one of the most flooded segments in the market - midsize SUV/crossovers. It is the first Sube ever to base above $30K. I have already read some derogatory comments in here about its new corporate nose. So it will definitely have its work cut out for it.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • davem2001davem2001 Posts: 564
    Yep, I, for one, do not like the new corporate nose on the Tribeca...the rest of it looks nice, but the front end ruined it....It didn't work for Edsel back in the 1950s, either! LOL! Also, we mentioned this in the VW thread, why is everyone trying to go "upmarket"?

    I look at Subie as a nice, rugged, affordable car, not a "luxury" car...
  • mirthmirth Posts: 1,212
    I have considered Subarus in the past, and, at least for the models I was looking at, it was always price that kept me away. I could get similarly equipped cars (without the AWD of course) for much less. For the price I would have to pay for a decent Sube, I could get an Acura or an Infinite. I still get that impression with the new generation.

    As far as the Tribeca goes, I don't like the new nose. If all Subes go with that nose it would completely turn me off the brand.
  • davem2001davem2001 Posts: 564
    Agree totally - I liked Subie better when they were in more direct competition with Honda/Toyota, but with AWD...rather than moving "upscale" you said, for the price of a new Legacy, you could be looking at an Acura or a Volvo or something like that.... And the new Tribeca "edsel" front end makes the "bug eye" Imprezza look good....
  • nippononlynippononly SF Bay AreaPosts: 12,687
    I believe that is the plan, though. All Subes to have that nose by the end of the decade. They have already done some concept stuff for the new Impreza using that new nose. It looks a little better when it is smaller.

    In the meantime, Impreza will have its third face in four years this fall. They are having a lot of trouble finding a look that suits them.

    And yes, you have to want AWD for a Subaru purchase to make sense most of the time. Otherwise it seems expensive relative to the competition. That is one of the limiting factors for increasing Subaru sales, IMO. Back when they started the "AWD all the time" theme, it was a great niche and they were one of the few companies in it. Now everybody and their mother has AWD in all sorts of different models.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • mirthmirth Posts: 1,212
    Yeah, that's true. Ford for one is making a big push towards offering AWD on their new cars.

    I mean, living in the snowy north as I do, I would be willing to pay an extra grand or so for AWD. But with all the Subes I ever looked at, the premium over comparable models was always more like 2-3 grand.

    The only Sube I ever really liked (other than the WRX) was the new turbo Forester, but my wife hates the look.
  • nippononlynippononly SF Bay AreaPosts: 12,687
    Actually, I have thought from time to time that since Sube already has the running gear and boxer engines in all their cars anyway, why couldn't they be the first ones to start offering RWD compact and midsize cars (and wagons) again? They could knock $1000 or more off the price of every RWD car, when compared to its AWD equivalent. It would make them more competitive on price, and it would also be a plus to have RWD instead of the junky FWD everyone else has. I think they should definitely consider it. Their advertising campaign has moved on from the days when it was "the beauty of AWD", and they are cultivating the image of sporty cars. What is more sporty than RWD?

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • dino001dino001 Tampa, FLPosts: 3,475
    Don't you think AWD has to come with some premium? So, if you want same price, you must get less other "stuff", or i fyou want stuff and AWD, you have to fork over more dough. Simple fact of life, can't have both: superior drive/perfmormance and same features for same price. So complaints that Legacy is more expensive than say Camry or Accord are just based on expectations of sime kind of miracle (lower volume, more content, same price).

    Legacy was a clear success with the press, but I agree that if it sells for 3-4K off MSRP just one year after the debut, something is not working. One may debate if "upscale" aim was a good idea. Perhaps it was, but execution was quite poor: no "premium" features (HID lamps, nav system, etc.), limited option list, and no manual on 6 cylinder (no 6-cylinder on Legacy) - these are major misfires. As I understand, they are not going to fix them in 06, yet.

    Legacy is not a premium car. Call it semi-premium, if you will. I suspect, it will take another redesign and some real upgrades in dealership networks and ownership experience (warranty, maintenance), etc.

    I think Subaru is fine, at least from marketplace standpoint. I am not familiar with their financial situation. It would be really horrible, if they had to go. I would rather see all Big Three go before them... ;)

    2012 BMW 328i wagon, manual and sports package. No. sold in the US: 1. Probably.

  • xwesxxwesx Fairbanks, AlaskaPosts: 8,391
    I agree, mirth. I think part of the reason why sales have remained so flat is that the price of the car has crept up at about the same rate as interest. Sure, part of the goal was to go "upscale," but to do so at the expense of leaving the commodity market means that those margins that sweet_subie mentioned must be maintained. Perhaps GM has had more influence on FHI than we'd like! :mad:
  • nippononlynippononly SF Bay AreaPosts: 12,687
    you can get a Matrix XR 4WD for what, $18K? This is a car with almost the same cargo space as an Outback, a viscous center coupling that runs 50/50 front/rear, and costs about $6K less at sticker than an Outback now. Meanwhile, Legacy is in the Mazda6 class of "tweeners" - significantly smaller than the majority of midsize sedans. Impreza and Forester are of a size that four adults is only a comfortable fit for short rides. Tribeca will be the first Sube to have a cabin big enough to accomodate 5 proper adults (and two kids, if you get the 7-passenger), and again, it will start over $30K.

    dino: "Don't you think AWD has to come with some premium?"

    Of course it does. At present competitors are beginning to offer their AWD vehicles at LESS of a premium. And what you said is also very true - how can Subaru say they are going upscale and introduce a new generation of Legacy/Outback without an optional NAV? In cars that sticker (many of them) over $30K? Heck, you can get NAV in a $20K Mazda3. There are other ways that the "upmarket" claims ring a little hollow too.

    I like Subes, and I wouldn't mind seeing them just scrap all these upmarket pretensions and new sales goals, and just go on doing what they do so well. But apparently they can't afford to, if SIA is losing so much money.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • varmintvarmint Posts: 6,326
    Back when there was a thread dedicated to the idea of Subaru going premium, it was explained to me that the goal was not become a near luxury brand. SOA targeted Honda and Toyota as the brands which were able to command a "premium" for their ordinary cars. In other words, not have to use huge discounts.

    Frankly, I thought Subaru was doing very well. The Legacy/Outback is the best looking Subaru I've seen in a long time. The WRX is practically a performance icon. I would have thought that they could build more effectively on those models. I guess I just wasn't looking closely.

    Now that I think about it, Subaru has probably had as many losses as wins. We'd all like to forget the Baja, but I'm sure it has cost SOA some cash. People don't seem to be buying the up-market models Subaru is offering (even though I think they do represent a decent value). Gas prices have people rethinking turbo power and AWD. And Subaru's most successful model, the Outback, is now facing a much more crowded field.

    Perhaps Subaru should have targeted Hyundai instead of Toyota. Building basic cars for us cheap yankees in the north may have been the way to go.

    One last thought... Nissan was able to turn themselves around in about 4 years. That's remarkable. Even though I wouldn't expect Subaru to do the same, I don't buy the notion that 10 years is too soon to make judgments.
  • nippononlynippononly SF Bay AreaPosts: 12,687
    I don't know about the Hyundai model - that is what got Subaru into trouble in the 80s.

    But how about Nissan? They incorporated HUGE economies of scale for one thing - one engine doing service in about a gazillion models, three or four platforms serving all the different models. They poured on the power and lowered the prices in real dollars. Can Subaru afford to do that? Renault provided most of the initial cash for Nissan. I don't think GM is going to do the same thing for Sube without insisting on running the show, and if GM is allowed to run the show, it will be an unmitigated disaster for the long-term fortunes of Subaru.

    10 years is a little soon to start making pronouncements. But Subaru always seems to be behind the curve financially. They needed all those fat profits of the late 90s to make up for the almost-bankrupt early 90s. So not enough of it got reinvested into expanding the line-up, trying something different. So that today ten years later, they are only just introducing their fourth model (not counting the Baja, which wasn't that "new" - it was an Outback with the rear roof sawed off). And now, when they need to be reinvesting in a big way, sales have stagnated and income is down. What this bodes for the Forester and Impreza revisions in the next 18 months, I dare not imagine. But the sporty direction that Subaru has been going the last few years is a hard path to follow competitively, because it is what almost everybody else is doing also.

    2013 Civic SI, 2009 Outback Sport 5-spd (stick)

  • varmintvarmint Posts: 6,326
    In the eighties and early nineties, Subaru had to grapple with Toyota, Mazda, Nissan, Hyundai, and Honda who were also selling inexpensive cars. Now that most of those import marques have moved into bigger and more expensive variants, it leaves something of a vacuum. A lot has changed since the eighties.

    From another perspective. If you were forced to pick a fight, who would you rather punch in the nose... Toyota, Honda, and Nissan... or Hyundai, Kia, and Mitsubishi?

    As for economies of scale, I think Subaru is doing okay on that front. The Outback/Legacy/Baja is one platform. I believe the B9 Tribeca is another from that group. The Impreza/WRX/Forester is another. Except for the Tribeca, they all use a variant of Subaru's 2.0 or 2.4L boxer four. Or the H6, which is shared by the larger vehicles.

    FWIW, I think the H6 was another "miss" for Subaru.
  • rroyce10rroyce10 Posts: 9,359
    ...... I wouldn't worry too much about the Subu's ...

    They have a very loyal customer base, their reliabilty is super and the longevity is a matter of history .. folks don't bat an eyelash at a 65/85k Subu that's on the market "for sale" .. and their resale value is stronger than the 101st Airborne in a fire fight .....

    Do they have the slickest looking vehicles on the road, or the cleanest lines, or the biggest interior.? - Nope .... but, not bad for a manufacturer that has AWD down to a science, a less than average dealer base and spends tons less money than the others on Ad's and commercials ... most of it is done with word of mouth .......... unless they do something really stupid, I think they will do "just fine" ...

  • dino001dino001 Tampa, FLPosts: 3,475
    nippon: I gather you never drove Matrix, otherwise you would never compare it to Outback. It is like saying that Hyundai XG 350 or Kia Amanti are almost as good as Mercedes E350: same size, similar performance, and look how much cheaper! I don't know the datails but I was under impression that this 4WD from Matrix is nothing like AWD from any Subaru. It comes with weak engine, automatic only and don't mention the interior! The car is at Impreza level, just slightly larger inside (because it is taller) and should be compared to that one. If you do, then the price spread suddenly disappears in a snap.

    I essentially agree with other parts saying there is a problem if they claim to be a BMW fighter (look at their commercials), but they don't even offer "basic" luxury conveniences/options. But to be exact - Mazda3 with nav and other goodies gets closer to $25K than to $20K - just for the record.

    2012 BMW 328i wagon, manual and sports package. No. sold in the US: 1. Probably.

  • davem2001davem2001 Posts: 564
    I agree to a point, but I think they need to stay closer to their roots - affordable, sturdy, durable, AWD cars/stationwagons/SUVs.....and not stray too far off into the "upscale" world.......Plus, I still say the new corporate "face" is ugly!
This discussion has been closed.