Report: Subaru Considers Expanding Indiana Assembly Facilities

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It's always a good problem to have: demand for Subaru cars and crossovers in the United States is up, to the point where Subaru's parent company, Fuji Heavy Industries, is considering adding plant capacity at Subaru of Indiana Automotive, its sole American plant. Subaru's story is much the same as its Japanese counterparts and competitors: demand is up in the American market, but a stubborn Yen-to-Dollar rate (which strongly favors the Yen, and doesn't show any signs of dropping) ensures that Japan-assembled cars aren't going to make much money. A Toyota Camry, for instance, has more price flexibility than a Prius (the Camry is built in Kentucky, the Prius in Japan) and--in theory--a larger profit margin. But profit margins only tell part of the story. Subaru's sales are way up this year, to the tune of 299,788 Subarus sold through the end of November. Sales of the Impreza are up some 184 percent over last year, and the Legacy and Outback are up 13.6 and 16 percent, respectively, year-over-year. Subaru recently announced that November 2012 was its best November ever. Production at Subaru's plant in Lafayette, Indiana is projected to hit 277,835 vehicles this year, an all-time record, and the plant's maximum capacity currently stands at 310,000 units, capped by Indiana anti-air-pollution regulations. The plant makes Tribeca, Legacy, and Outback models, as well as Toyota Camry sedans (under contract with Toyota, which owns a 16.5-percent stake in Fuji Heavy). With the new Impreza doing so well (it's the third-bestselling Subaru, behind the Outback and Forester) and a new Forester on the way, Subaru bosses are wondering if it's a good idea to shift some production here. Bloomberg says that shifting some Impreza and/or Forester production to the U.S. would mean adding at least 50,000 units of production; considering the two will sell a combined 140,000 units this year, a 50,000-unit bump would only mean one in three Imprezas (not counting WRXs) or Foresters would come from Indiana. Then again, Subaru says it has another possible trick up its sleeve: its Indiana plant sits on a huge tract of land--one big enough for a second assembly plant. Adding a second facility could be a gamble to the tune of at least $1 billion, but with Japanese exchange rates and American auto demand remaining high, it might be the best move for Subaru. Source: Bloomberg

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