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

jeffmc

SOA Blog made some good points about the assumptions the article's author made and the story's "slant". Don't agree w/everything, but thought it was a good counterpoint. Too bad that counterpoint will never make it to a news service & most folks who read the Bloomberg story will end up with a negative impression of Subaru as a result.

jeffmc

"Firstly, while we do of course wish to improve our margins, I know that many manufacturers would be glad of such a margin" is just plain defensive talk: clearly none would be glad of such a margin except maybe Mitsubishi, the one lower than Subaru on the list.

I think SOA Blog was talking about all auto manufacturers, not just the Japanese on the list.

zman3

Well said. Thanks for saving me the typing.

w8ifi

The 29% drop they mention probably refers to Fuji Ind. as a whole. That is if they follow most financial speak. If it is all attributable to the Subaru division it should be clarified. As Holland pointed out months ago, Fuji is much more than just Subaru.
I think the Impreza changes and the redone Forester are real improvements and will get a good response. Worldwide economic factors are going be a big restraint on the industry this year and most will do well just to equal last years volumes even with new products. According to a news broadcast today, even auto loans are getting hard to get credit at good rates. I do think (maybe wishfully) that all the storms that went through Indiana, Ohio, Pennsylvania and the northeast may give Subaru some boost.
Up here in yooper land in most storms driving isn't as bad as in the areas I mentioned. We usually have colder temperatures and a lot less slush and ice then the people south of us. Also a lot less traffic volume with room to manuver. When it's around zero you can get pretty good traction even on ice.
Jim

rsholland

http://forums.nasioc.com/forums/showpost.php?p=21498855&postcount=63

Even though he goes by "SoDealer," he really works for SOA in some capacity.

Bob

ateixeira

there are so many very good models competing in this segment, including RAV and CRV. Battles in the small crossover segment are hard-fought

I agree, but keep in mind this segment continues to expand.

The old Forester sold in volumes of 45-55k per year for its whole life, fairly consistent sales over the years, too.

The segment leaders do 120-150k. They have a lot more marketing funds and more dealerships, plus they are more established, but realistically I think the Forester can get up to 80k yearly sales, which is still a very significant bump.

They've had this evasive 230k/year sales target, and keep falling about 30k short. I think the Forester can more than fill that gap.

I test drove one the other day, and was really impressed. It rolls a lot less than my '98 did, which already handled well for its class. Reviews so far are all positive. Prices are down slightly, even factoring equipment content.

I still think the Forester can catapult them to their goal.

In fact we'll probably buy one. Just waiting for the right color to show in dealers.

varmint

I read a JDM ride&drive in Winding Road. Too many differences with the US-spec Forester, but their overall impression was favorable. If I were buying today, I'd be leaning toward it, rather than the CR-V. Not impressed enough by paper to pick it over a 4cyl RAV4, but that could change with a test drive.

So, yeah, I think the Forester could put them in a happy place within the US market.

Having said that, Honda started off selling something like 90-120K with the 1st gen CR-V. The second gen sold at a pace of 110-150. The ugly gen is now selling at 150-200K. Don't get me wrong, I'm not trying to put a negative spin on what the new Forester might do; but let's put its potential success in perspective. Compact crossovers is a segment where Subaru should have been dominant. CUVs been around for more than a decade and Subaru finally has a product that might reach 50% of the sales leader.

Is the Forester going to be good for Subaru of America? Absolutely.

Is the Forester a strong example of Subaru's business strategy? Not so much.

varmint

The SOA blogger's reply amounts to, "we like having our heads in the sand." He makes one good point. I can't figure how FHI's stock is going to remain steady and drop at the same time.

I can't figure where SoDealer is getting his info. Total sales for SoA are down 3% YTD. It's true that Impreza sales are up and the new Forester should increase sales, but at the moment sales of the Tribeca, Legacy, Forester, and discontinued Baja are bringing sales down. Even with the new Impreza and Forester, I believe (please correct me if I'm wrong) both models are imported and will be facing issues with the weak dollar.

ateixeira

I don't think either one of us can quite understand the runaway success of the new CR-V. Hard to explain that one.

Nonetheless, Subaru doesn't have to match Honda for volume to succeed. I don't even think they should try.

ateixeira

The strong Yen has happened gradually so I think they are prepared for that. It's still hard.

It is imported but now that the Camry is built in SIA, solving the excess production capacity, they would not have room for the Forester there anyway. There is talk about moving Forester production here eventually, but it would take years IMO.

rsholland

Hard to understand the CRV's success? How so? Besides the questionable front styling and rear quarter window, it's an excellent package. No, it's not the best at every facet, but few Hondas have ever been the best at all things—but the overall package, all things considered, is excellent.

Bob

paisan

Everyone is saying that the market segment is crowded, however they don't realize that the pie itself has gotten larger. Even if Subaru's Slice %-wise becomes smaller, the overall $-wise will go up.

-mike
Motorsports and Modifications Host

dino001

I actually think CRV is one of best looking tall wagons out there. When I saw it first time my first thought was if I didn't officially hate SUVs so much I might actually like it Add general Honda brand appeal and recognition, possible right on the spot feature content/price point and you get a success.

ateixeira

They've always had a decent package, my "hard to understand" comment had more to do with why sales have gone up for this latest generation, significantly, compared to the 1st and 2nd generation. Sales had been fairly consistent over the years.

I thought about it over the weekend, and the victim of this sales increase may be the Element. I think that model hasn't been getting many updates and perhaps Honda customers are getting the fresh-looking CR-V instead.

Any how, we'll see how the Forester does. I think this will be the fastest growing class of vehicles, period.

rsholland

Again, it's more refined than before and offers a lot of what that customer is looking for. We have a CRV, as you know, so I'm very familiar with the old one, and as good as our '04 model is, this is just much nicer. So I'm not at all surprised by its success.

Bob

ateixeira

I haven't driven the new model yet.

Maybe I'll take the wife before we make a final decision on her new car. She sort of has her mind set on the Forester after the auto show (and has not even driven it yet).

rsholland

I think you'll find the CRV to still have an edge in cargo capacity, especially when the seats are folded. As improved as the new Forester is, our CRV still has loads more cargo area—seats folded or not. That means a lot to these CRV customers.

The CRV has a lower rear load floor, plus the rear seats fold and tumble. Both those features add up to big gains in "useful" cargo space.

Bob

ateixeira

She didnt' like the styling much, and complained about visibility when she sat in one (at the DC Auto Show).

It's hard with her, she'll take one glance and rule it out. She saw the Rogue and said "Oh God No" and that was it. Dismissed. Next!

RAV4 was her 2nd choice, so maybe we'll test drive that.

Outlander fans have been trying to convince me to put her in one of those but she didn't like the styling on that model, either. It may not have helped that the one at the show had a depressing all-black interior.

dino001

CRV might have been a beneficiary from all those Explorer/Trailblazer refugees "scaling down" for the gas mileage. Just a speculation.

paisan

I so think that Subaru needs to introduce a gauge or meter that shows how much power is going to F/R so they can show that their AWD system is far more proactive than the generic AWD/reactive AWD systems out there.

-mike
Motorsports and Modifications Host

ateixeira

True. I think whatever loss the truck-based mid-size SUVs suffer may be a gain for the compact crossover class.

GM has the new Vue, which is nice, but a bit overweight. I test drove one. It was a lot better than the old Vue, but I hated the seats.

Haven't sampled an Edge or the new Escape. The latter was a major disappointment. It seemed like they did a very minor refresh when it was actually do for a full redesign. The Edge seems huge and heavy outside, small inside. I hate that.

I bet a Honda Fit has the same amount of passenger space as the Edge in a package half the size. That just annoys me.

robr2

I so think that Subaru needs to introduce a gauge or meter that shows how much power is going to F/R so they can show that their AWD system is far more proactive than the generic AWD/reactive AWD systems out there.

But unless they can put them in the competition, it's not going to prove anything.

Besides, most people still don't care.

varmint

The new schnoz on the CR-V keeps me up at night, but the rest of the design looks pretty good. Mercedes has the uncanny ability to design cars that don't look especially sporty or sexy, yet they somehow manage to look expensive. I think Honda somehow managed a little of that with the new CR-V. It doesn't look like a Lexus, but it looks a tad more upscale than the rest. That combined with good packaging, a great interior, and name recognition seems to have done the deal.

Mid-size SUV buyers moving down in the Compact CUV segment is something that has been happening for years. That trend explains most of the CUV growth. The benefit is not specific to Honda or any other manufacturer. If we pinpoint fuel economy as the reason for that shift, I would think the I4 RAV4 and Forester would be doing better than they are.

The power split gauge has been done. While the display is a little cheesy, the RDX demonstrates not just fore and aft distribution, it also provides evidence of the lateral torque split. It ain't helpin' sales. If Subaru added a similar display to the Forester, journalists would write, "It's like the gauge in the SH-AWD equipped RDX, only Subaru can't spread the torque to each rear wheel." A front/back split is sooo 90's. That's not what Subaru needs.

ateixeira

I dislike the underbite, too.

I gotta get over that minor detail and go test drive one anyway.

For whatever reason, though, my favorite Honda is the Fit. My brothers and I pitched in and helped my mom get one of those in Brazil.

robr2

The underbite doesn't bother me anymore. I just wish they could stretch it just a bit for a 3rd row as I'm not totally sold on the new look of the upcoming Pilot.

The CRV's success lies in that it's a great value, attractive, well sized and it has the magical "H" on the front.

My Dad who bought his first Honda about 12 years ago (a used Civic), is now on his fouth and his second CRV.

ateixeira

I like the interior. I wish that D-pillar were smaller, the old one was better.

They did go to a liftgate, which I prefer.

Any how, consumers are snapping them up like there's no tomorrow. It's the best seller, period, beating even the Explorer.

For the wifey, the Forester did not disappoint, plus we have $1600 Subaru Bucks. That's hard to ignore, though I could use it to buy accessories (bike racks, ski racks, igloo cooler, etc), and even for the body shop to replace a cracked windshield on our Legacy.

paisan

Ok I give up, since everyone here is happy to only SAY WHAT IS WRONG with Subaru, instead of giving any kind of DOABLE constructive criticism, I'll write this off, like the folks on NASIOC who insist we need a 900whp STi and a huge turbo!



-mike
Motorsports and Modifications Host

zman3

OK here goes:

1) More refined engines. I don't care that it is a boxer and distinctive, it feels like crap compared to a Honda engine. The vast majority of people couldn't care less about the low CG, or that Subaru is proud of it's heritage.

2) Improve mileage across the board. My 98 4 cylinder OB and my 06 3.0R got/get only 20 MPG in daily driving.

3) Try a 5 speed or 6 speed auto rather than a 1980's four speed auto.

Maybe that will get the ball rolling.

bristol2

If I can add on,
4) Something that seats 4 adults.

The back seat of the OB is the one reason I can't add it to a list of potentials and the Forester and Tribeca are no better.

jeffmc

Wow, you don't think Tribeca comfortably seats four? I'm surprised. Did you have the middle row all the way back? Sounds like they'd need to go quite a bit larger with an Outback or Forester to satisfy you.

bristol2

I should have clarified, I am not that interested in going with an SUV and the back seat on the Outback is too small for many car seats, let alone 2 full grown adults.

It wouldn't need to be full-size big, a couple of additional inches would probably be enough. Take a look at how the Audi A4 has grown it's interior space to address a long term negative.

ateixeira

The 2010 Outback will definitely grow significantly. Perhaps the Legacy sedan will as well.

Subaru has built one car for Japan and the US, while Honda and Toyota have built a seperate, dedicated vehicle for US consumption. That means Subaru has to abide by JDM regulations, which keep sizes down to avoid higher taxes.

If you notice, the Legacy is about the same size as the Mazda6 and the Acura TSX. My theory is that those cars are sized for other markets, like the Legacy is. The 3 are remarkably similar in size (wheelbase, length, etc).

The real problem here is Subaru does more volume in Japan than they do in the USA. It's hard to convince Fuji to build cars custom-sized for the USA when it is not your biggest market. The Tribeca was the first time they truly built a car for the US, and even that model is not as big as its newer competitors.

Any how, the Forester has good legroom now, so they're aware of this issue. I'm sure the 2010 models will address this, too.

ateixeira

The 4 speed auto in the Forester was the only major "miss" IMHO, on this re-do, but rumor has it a CVT is on the way. I think that's why they didn't invest in a 5 or 6 speed automatic.

A CVT has worked well for Nissan. Mitsubishi also now offers one in the Outlander 4 cylinder.

Let's see how Subaru implements theirs. They had lots of issues with their ECVT Justy in the early 90s, but I doubt they'll repeat the same mistakes. Plus, I bet they use Nissan's supplier, given a lot of hardware is already shared between the two makes.

If the CVT works on the Murano, it'll easily be strong enough for the Forester, even the turbo.

robr2

The real problem here is Subaru does more volume in Japan than they do in the USA. It's hard to convince Fuji to build cars custom-sized for the USA when it is not your biggest market.

Perhaps then they shouldn't have spend hundreds of millions building a factory in this marketplace if they weren't committed to it.

Hopefully they have decided that if they want to be a viable nameplate in North America, they have to build vehicles that the market wants. I think Subaru makes good vehicles and if they would put marketing on the same level as engineering, they'd increase sales.

I see it all the time with the European brands my company sells.

Them: "We have engineered a class leading mounting system."

Us: "That's wonderful but it takes eight steps to do the job of the three that the competition does and it's 30% more expensive."

varmint

I feel your pain. Whenever I try to post a positive direction for Subaru, I get blasted for blaspheming against The Core Values Of Soob.

The problem is that some ideas have been tried and failed. Subaru has been trying to make their AWD seem special for decades and it still hasn't made a dent in the mass market. Continuing to beat their heads against that wall just doesn't seem like a solid approach to me. Time for a new idea.

varmint

"Perhaps then they shouldn't have spend hundreds of millions building a factory in this marketplace if they weren't committed to it."

In all fairness, they did it in partnership with Isuzu. They were victims of Isuzu's issues as much as anything else.

The next hurdle for Subaru is probably going to be the fact that the Japanese market is looking to tank. Polls report that young buyers aren't buying. They don't want to own and maintain a car. Apparently, they have better things to spend their money on.

rsholland

...And suggesting offering FWD or RWD isn't a new idea. It's a stupid idea. Sorta along the lines of offering a 4-cylinder Corvette.

The "new ideas" we're already starting to see. It's the new Impreza, which is selling in record numbers. It's the new Forester, which I predict will also sell in record numbers. It's the larger 2010 Legacy and Outback, which should also do much better than the current models.

Bob

ateixeira

varmint beat me to it but yeah, SIA was Subaru-Isuzu Automotive before it became Subaru Indiana Automotive.

The highest volume vehicle from that plant was the Isuzu Rodeo. At one point the Rodeo was the best selling import SUV in the USA. Subaru just couldn't pick up all that slack.

Toyota did, so that problem is solved.

Now SoA has to convince FHI to make the other changes we discussed.

ateixeira

Sorta along the lines of offering a 4-cylinder Corvette.

Not quite the same, but funny nonetheless, I just got this from Automotive News:

ALERT: GM considers four-cylinder engine for new Camaro

FWIW I think that's a bad idea. Yes, GM should build a competent 4 cylinder, but it should be called Cobalt, not Camaro.

A 4 cylinder 'vette is a CHEvette.

robr2

And suggesting offering FWD or RWD isn't a new idea. It's a stupid idea.

Bob - I think most folks realize that. But for Subaru to keep trying to use their magical pixie dust version of AWD and the boxer as differentiation isn't going to work and they need to look at something else. And as I noted earlier, they have to stop letting engineering dictate what they'll make and let marketing do that.

In this ultra competitive market, trying to sell a JDM sized vehicle with a funky engine design isn't going to work against the Altcamcords/RAVCRV's/Pilolanders out there. AWD isn't anything special anymore. Nobody outside of engineers and enthusiasts care about the boxer engine. Yes, those features are part of Subaru's DNA but they don't help sell the vehicle TODAY - there are too many good alternatives. Success can be had by keeping the core and moving it in a new direction. VW gave up on their air cooled DNA and but kept the "people's car" portion with the Rabbit. Porsche gave up on their sports cars only DNA and introduced the Cayenne - a sports car masquerading as an SUV.

The new Impreza and Forester already are starting that process. They are maintaining the core of the Subara DNA but becoming more mainstream. But Subaru has to continue that and bring the Legacy and whatever new products into line with its competition.

rsholland

Rob, it's obvious by your post is that you have absolutely no idea as to how valuable and important core DNA features are to a brand's image and to their success.

How many times do I have to say this? Once you start diluting that DNA by offering FWD and/or conventional powertrains, you've lost that special essence that made that brand so special. Once that happens, Subaru will become just another Asian car brand.

The new Impreza and Forester ARE more mainstream. What makes you think the next Legacy, Outback and Tribeca won't follow suit?

Bob

stever

I that that special essence you speak of only appeals to the Subie enthusiast niche. And that niche is getting pulled in many directions as all the car makers keep introducing lower volume niche cars.

AWD to many means a MPG hit.

Maybe Subie could offer a standard FWD MPG mode (one that really helps the MPG), with an AWD button for the snow days. A fancy version of the insert the fuse trick.

A few people have commented on the AWD abilities of my Subaru, but no one has ever hopped in my passenger seat and commented on the throaty efficient roar of the boxer engine. Maybe if it knocked like a diesel. :P

rsholland

but no one has ever hopped in my passenger seat and commented on the throaty efficient roar of the boxer engine

No, but I bet they've commented on how well the car handles. You can thank the low center of gravity that the boxer engine affords for that.

I could care less what it sounds like, but I can really appreciate the superior handling.

Bob

robr2

Rob, it's obvious by your post is that you have absolutely no idea as to how valuable and important core DNA features are to a brand's image and to their success.

Bob - I know how valuable and important core DNA features are to a brand image. I market luxury products in a highly competitive marketplace. But I also know that if those core DNA features no longer differentiate the product and don't provide a compelling reason for the customer to buy, then it's time to look for new and addtional compelling reasons for the customer to buy.

Re-read my post. I'm not saying that they should go FWD or use conventional drivetrains or completely give up the core DNA. Rather they should de-emphasize it in their marketing and focus on making and marketing vehicles the marketplace WANTS TO BUY. I've seen plenty of brands in my industry wither away and die because they refused to change their products or processes in order to deliver what the market wanted.

Continued focus on the boxer engine and symetrical AWD in their marketing isn't going to sell more Subarus!!!!!! Sorry, but the vast majority of the market doesn't care - an AWD Fusion is the same as an AWD Legacy is the same as an AWD Pasast.

What they should be doing is making vehicles with styling, features, sizing, et al that the market is willing to buy which they are finally doing to a point. IMHO, the Forester has to be 100% there - anything less and the marketplace is going to bypass it in favor of those products that cater to the market.

Nobody gets rich selling niche products at pedestrian prices.

stever

None of my passengers has commented on the handling (and rarely on my driving skills either, which I suppose is a good thing :shades: ).

One friend who borrowed the Outback for a few days liked the way it drove.

rsholland

Sorry, but the vast majority of the market doesn't care - an AWD Fusion is the same as an AWD Legacy is the same as an AWD Pasast.

The problem is that Subaru hasn't been able to, for whatever reasons, to communicate the advantage of their AWD over others. Maybe they should just show this in-house video?

http://blogs.edmunds.com/Straightline/Comments/4492#cm

This is mostly a marketing problem, not a vehicle content problem.

IMHO, the Forester has to be 100% there - anything less and the marketplace is going to bypass it in favor of those products that cater to the market.

It's about 95% there as it stands—and it WILL set sales records for Subaru, just like the Impreza is now doing.

Bob

varmint

ROTL Sure, Bob, the FWD economy car is the joke of the industry. Nobody sells any of those.

Subaru can keep their quirkiness and continue to struggle (if not fade away). Or they can take the aspects of their cars the mass market places value upon and apply them to mainstream cars. Personally, I'd rather see a line-up that included an inexpensive, fuel efficient FWD Legacy along side the AWD variants, than a Legacy that is literally a legacy.

rsholland

All this thread does is raise my blood pressure, and I don't need that.

It's clear to me that you guys don't have clue as to what Subaru is about. Carry on. I'm outta here.

Bob

robr2

It's clear to me that you guys don't have clue as to what Subaru is about.

Bob, you're taking this too personally. We understand what the Subaru brand is about. But even you have to admit that what it's about isn't resonating with the market. It may strike a chord with you, but you are the exception.

The vast market isn't interested in a lower center of gravity nor a unique AWD system. What it's interested in is styling, value, efficiency and features. And no matter how much education or advertising you throw at them, it's not going to sway them unless it comes with what the market wants. Doing what one has always done for the sake of "it's better" or "it's what we like to do" will only lead to irrelevance and extinction.

We want to see Subaru do well - the more product out there, the better it is for all of us.

dino001

I don't think they would be really able to communicate to public their AWD vs others. Most people don't know if their car is FWD or RWD, so let alone subtle differences between types of AWD. Most people say I drive XXXXX because I like the brand, I like the price, I like the styling, I like the safety, or I like the features (in any combination of those). Many fewer would say I drive XXXXX because it is fast and because it handles better. Even fewer say I drive XXXXX because I like the direct injection on my engine or I have CVT. Guess what, Bob - AWD is probably in second group of the reasons, and "symmetrical AWD" may not even show up in the third - so marketing it is simply like ramming windmills.

What Subaru needs to get together is their packaging. They have safety, reliabilty, decent (but not outstading) styling, and handling/performance. They totally suck in product planning and feature content and are even worse in hitting right message in the advertising, i.e. why Joe Customer who barely heard their brand and has no clue if their car is FWD, RWD, jet engine or foot propelled, should buy their cars even though they are more expensive, less fuel efficient and don't have latest/snazziest content.

And give us some credit, Bob. We like the company and actually want it to succeed. Some ideas may be wrong, but the overall diagnosis seems to be correct - Subaru does have a problem and not a small one.