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Subaru of America celebrates 50 years

Fuji Heavy Industries (to be renamed Subaru Corporation in April 2017) traces its roots to the Nakajima Aircraft Company, a leading Japanese aircraft manufacturer. By 1950, Nakajima was known as Fuji Heavy Industries and FHI was incorporated on July 15, 1953 when five Japanese companies, known as Fuji Kogyo, Fuji Jidosha Kogyo, Omiya Fuji Kogyo, Utsunomiya Sharyo and Tokyo Fuji Sangyo, joined together. The Subaru name means ''unite'' in Japanese. The company logo is the six stars recognized by the Japanese in the star constellation Pleiades (Subaru in Japanese).

Subaru 360Subaru of America was founded on February 15, 1968 by two American businessmen: Malcolm Bricklin and Harvey Lamm. In 1965 Malcolm Bricklin was selling franchises for motor scooters that included the Fuji Rabbit and the tiny Subaru 360. Bricklin then formed Subaru of America, Inc. (SOA) in order to sell Subaru franchises with Harvey Lamm, who at that time, was working in his family’s furniture store in Philadelphia. From 1967 to 1990, Lamm served as chairman of the board, chief executive officer, president and chief operating officer of Subaru of America, Inc.

The very first Subaru ‘office’ was in fact a small rental unit in Balboa Park, California, which Lamm set-up in 1967. The following year, Subaru of America was officially established in Bala Cynwyd, Pennsylvania before moving to larger quarters in Pennsauken, New Jersey in 1970. The headquarters moved to its current Cherry Hill, New Jersey location in October 1986. SOA is currently developing a new headquarters complex in Camden, New Jersey, which is expected to open in early 2018.

In the early years, Bricklin and Lamm’s business model was to sell distributor franchises to investors across the country, resulting in a total of 13 distributors nationwide. In subsequent years, SOA bought out most of the original distributors, with the exceptions of Subaru of New England (SNE) and Subaru Distribution Corp. (SDC) which covers NY and parts of NJ.

On August 31, 1990, Fuji Heavy Industries (FHI) acquired Subaru of America through a $6 per share cash offer. FHI had already purchased just under half of SOA stock from prior investments.

The first Subaru - the 360 - reached the United States in May, 1968. Priced at $1,290, it was $300 cheaper than the similar-looking Volkswagen Beetle and was 1,000 pounds lighter. This made it exempt from federal safety standards, and the car was required to meet only the less-stringent standards of individual states. In contrast to the company’s modern reputation for safety, Consumer Reports rated the 360 as ''unacceptable'', which quickly affected sales.

A larger model was needed, and in 1970, Subaru developed the FF-1. The front-drive FF-1 was handy for driving in snow and gave Subaru a new market position as the first Japanese manufacturer to feature front-wheel drive, as well as the first Subaru vehicle to have the horizontally-opposed “boxer” engine. The FF-1 was replaced by the larger, more powerful Leone series in 1973, which was marketed simply as either a DL or GL model regardless of body style, in order to focus on establishing the Subaru name. In 1975, the company introduced its first station wagon with all-wheel drive – the DL/GL. It is a major automotive milestone, as the first mass production popular priced 4WD passenger car. It spawned a revolution in the mass adoption of 4WD and AWD cars and crossovers.

The 1973 Oil Crisis helped the makers of small cars, and Subaru was no exception. However, Subaru then suffered from Yen/Dollar exchange rate changes which forced FHI to raise prices with a resultant sales drop. With supply now exceeding demand, the company suffered severe losses.

In 1978, the company debuted the BRAT (Bi-drive Recreational All-terrain Transporter) to meet the demand for small pick-up trucks in the US. A notable owner of a BRAT was President Ronald Reagan.

Subaru BRAT

In 1981, the company was an inadvertent beneficiary of a MITI trade agreement between Japan and the US whereby Japan voluntarily agreed to limit the number of cars sent to the United States. With supply restricted, Subaru added features and raised the average price of its cars from $6,000 to $8,000. At this time SOA became highly profitable; however, it was an unsustainable position for the company.

In 1989, Subaru, together with Isuzu opened a factory in Lafayette, Indiana called Subaru-Isuzu Automotive, Inc., or SIA. The plant initially produced the Subaru Legacy and Isuzu Rodeo. In 2001, FHI purchased the Isuzu holding for $1 and renamed the factory as Subaru of Indiana Automotive, Inc. From 2007 until 2016, SIA also produced the Toyota Camry under license.

In 2003, SIA became the first automotive assembly plant to be designated a Backyard Wildlife Habitat by the National Wildlife Federation. In 2004, SIA became the first automotive manufacturing facility in the U.S. to reach zero-landfill status.

The plant is currently operating at its highest-ever capacity and is expected to produce close to 400,000 Subaru vehicles in 2017, including the Legacy and Outback models and the all-new 2017 Impreza, the first time Impreza has been built in the US. A new 3-row SUV model is also expected to be produced at the plant beginning in 2018.

In the late 1980s and early 1990s, Subaru signaled an evolution to its positioning with the introduction of sporty coupe models; the XT in 1986 and the SVX in 1992. The Legacy model, a clear move upscale for the brand, was introduced in 1989.

However, the widening of the brand also caused Subaru to lose its focus on its core American buyers. By 1993, the company was showing record financial losses, high inventory (300-day supply), six consecutive years of declining sales, ineffective advertising, and a confusing brand image.

In 1995, in response to the growing trend for SUVs, SOA launched the Outback – the “World’s First Sport Utility Wagon.” Supported by a marketing campaign using Crocodile Dundee actor, Paul Hogan, the Outback model helped Subaru sales in the US recover.

Subaru Outback

General Motors took a 20 percent share in FHI from 1999-2005. In 2004, GM’s subsidiary Saab sold a version of Fuji's Subaru Impreza - the 9-2x - built by FHI in Japan. In 2005, Toyota Motor Corp. (TMC) paid approximately $300 million to GM for 68 million shares, equal to an 8.7 percent stake in Fuji. In 2007, TMC paid $311 million to raise its stake in Subaru parent Fuji Heavy Industries to 16.5 percent. This partnership led to Toyota production by FHI and the development of the BRZ/FRS/86 sports car which debuted in 2012.

The introduction of the WRX to the US in 2001 revived attention in the brand. In 2002, looking to further expand its offerings, the company developed the Baja model, an open bed pick-up, based on the Legacy.

Subaru launched the Tribeca mid-size crossover in 2005, initially as the B9 Tribeca and the model was named after the Tribeca neighborhood of New York City. Produced at SIA in Indiana, Tribeca was developed as a joint-project with GM, with the partner model to be sold as a Saab - however the Saab model was not released. Featuring polarizing design, the model was quickly found to be too small for the US and while the 2008 models received a facelift and a larger 3.6-liter flat-six engine, the model never achieved its planned-for sales and was dropped in 2014 with the announcement of a new, larger 3-row model in the works.

By 2005, Subaru sales were stagnant and the company, now led by Thomas J. Doll, decided that a change was needed.

In late 2006, a new creative agency, Minneapolis-based Carmichael Lynch was hired and a new set of emotionally charged advertisements followed. Instead of buying a Super Bowl slot, the company sponsored Animal Planet's Puppy Bowl.

From 2007, the company readjusted pricing in order to protect residual values, and Subaru vehicles grew in size to better reflect US tastes. New models; Crosstrek and BRZ were added to the line-up. Focusing advertising on safety, reliability, versatility and performance, Subaru sales in the 10 years from 2007-2017 have risen consecutively from below 200,000 to over 600,000 vehicles per year, and the company’s continued sales growth is currently the longest in the industry. Subaru now outsells many established brands as the eighth best-selling brand in America. A new 3-row SUV model from the company has been announced for early 2018.

02/18/17

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