Toyota Share Holders Not Happy

Fuji Heavy Share Decline Proves Bad Bet for Toyota Shareholders

 

 

 

Quote:

By Makiko Kitamura and Kiyori Ueno

 

March 13 (Bloomberg) -- Fuji Heavy Industries Ltd., the

maker of Subaru cars, has dropped 28 percent since Toyota Motor

Corp. became its biggest investor in 2005. The companies'

failure to take Subaru beyond niche-brand status may extend the

slide.

 

While Toyota is using a Fuji Heavy factory in Lafayette,

Indiana, to build Camry sedans, joint development of new models,

including a possible sports car, is still under discussion.

That's a setback for Tokyo-based Fuji Heavy, which is struggling

to refresh its lineup after a 16 percent cut in research

spending over four years.

 

Operating profit will slump 17 percent this fiscal year,

Fuji Heavy forecasts. The company's 3.2 percent operating margin

is the lowest among Japanese competitors after Mitsubishi Motors

Corp. One reason is an engine design that's twice as expensive

to build as conventional versions and is shared, among carmakers,

only by Porsche SE.

 

``Their margins are terrible, and with their low volumes,

they're at a huge disadvantage,'' said Edwin Merner, who

oversees $2 billion as president of Atlantis Investment Research

Corp. in Tokyo and doesn't own the shares. ``They may end up

becoming just a subcontractor for Toyota.''

 

With global auto output totaling 585,028 last year, or 7

percent of Toyota's, Fuji Heavy lacks the scale to spread costs

among more vehicles.

 

The company's shares may be little changed for the next 12

months at 410 yen, estimates Tatsuo Yoshida, a senior analyst at

UBS Securities Japan Ltd. They're already down 19 percent in

2008, making a third straight annual decline likely.

 

`No Light'

 

``I see no light at the end of the tunnel,'' Yoshida said

in an interview, citing rising raw-materials costs and a

widening quality gap. Subaru was the only Asian passenger car

brand to post a drop in U.S. sales last year.

 

Yoshida is among five analysts in a Bloomberg survey who

rate the shares as a ``sell.'' Ten say hold; one says buy.

 

Toyota, which owns 8.7 percent of Fuji Heavy, has had

better luck with truckmaker Hino Motors Ltd., whose sales have

been bolstered by demand from emerging markets. The stock has

climbed 51 percent since Japan's largest automaker increased its

holding to a majority stake in 2001.

 

Fuji Heavy forecasts operating profit will drop to 40

billion yen ($388 million) this fiscal year. It will fall 2.5

percent more in the 12 months ending March 2009 as the Japanese

currency strengthens against the dollar, Yoshida predicts. The

figure was as high as 91 billion yen in 2000.

 

Research and Development

 

Cutbacks in research and development spending, now 32

percent less than Honda Motor Co.'s as a percentage of sales,

limit the automaker's ability to attract more customers with new

products.

 

``Fuji Heavy is in the unfortunate position of being stuck

in this vicious cycle,'' said Tatsuya Mizuno, Tokyo-based

director at Fitch Ratings.

 

Vehicle development and production was part of Toyota's

reason for buying the Fuji Heavy stake from General Motors Corp.

in 2005. The companies are exploring collaboration on new models.

That could help the smaller partner boost output and lower costs.

 

``We are currently carrying out active discussion with Fuji

Heavy Industries regarding consigned research and development of

a Toyota-brand vehicle,'' said Toyota spokesman Paul Nolasco.

 

After a 3.3 percent decline in global sales in 2007, Fuji

Heavy is targeting overseas markets to help raise Subaru's tally

8 percent this year. That may not be easy.

 

U.S. Goal

 

The company is aiming for a 7 percent gain in the U.S. --

where Subaru sales fell 6.7 percent in 2007 -- and where this

year's industrywide total may drop to the lowest in a decade.

Fuji Heavy is counting on models such as a redesigned Subaru

Forester sport-utility vehicle and Impreza WRX STI hatchback. In

Japan, sales fell 7.9 percent last year as the auto market

posted a fourth straight decline.

 

Subaru is also struggling to hang on to niche markets it

cultivated.

 

After courting drivers in snowy climates by pioneering

four-wheel-drive in passenger cars in the 1970s, Subaru now

battles similarly equipped models such as Nissan Motor Co.'s

Rogue and Honda's CR-V compact SUVs.

 

Lesbian Fans

 

The carmaker is also facing more competition for gay and

lesbian drivers in the U.S., a segment Subaru pursued by hiring

former tennis champion Martina Navratilova, a lesbian, as a

spokeswoman in 2000. Other carmakers including Ford Motor Co.

and Bayerische Motoren Werke AG have stepped up advertising in

gay media.

 

``Subaru's stronghold on the top spot in brand awareness in

our community is slipping,'' said Joe LaMuraglia, founder of

Gaywheels.com.

 

Even the so-called boxer engine, with pistons arranged

horizontally, instead of standing up or in a V-shape, may not be

worth the extra production cost. The engine is also used in BMW

motorcycles.

 

Subaru says the boxer provides a smoother, steadier ride

that attracts well-educated drivers. Twenty percent of U.S.

Impreza buyers hold Ph.D. degrees, the company says.

 

While Toyota may be able to use the engines to enhance its

offerings, Fuji Heavy remains locked in shrinking niches because

consumers are unwilling to pay extra for the technology,

according to UBS's Yoshida.

 

``The sad fact is that most consumers can't tell the

difference,'' he said.

 

 

So then don't introduce the Venza and take the Forester's business!

I can think of a few reasons why Fuji is sucking it up: Baja, Tribeca, 07 WRX, 08 WRX. It's as if Subaru strives to put out the ugliest vehicles on the market.

Boxer is a great design, especially coupled with AWD. Maybe it's more expensive but it has merits.The analyst is some bean-counting idiot. Subaru is redundant if it abandons their niche. That's why their actions to appeal to a broader consumer are questionable, they should cultivate their niches instead of alienating them.

 

I am optimist for EDM - the diesel will be a huge success. With strong euro FHI should be able to offer very competitive pricing. Boxer diesel FTW!

as long as they can pass CA smog tests

Diesel fuel is now over $4.00/gallon where I live. If it continues to be more expensive than premium gasoline, that's gonna put a dent in the auto companies' plans to give us Diesel passenger cars (finally). People will look at the increased maintenance cost, plus the higher fuel cost, and Diesel will get a big "FAIL" again in the US.

 

Hello, VW? Where is your Diesel? Where is your Jetta wagon? Where is your Jetta wagon Diesel?

 

-- Steve

**** Toyota...and their shareholders.

I think that they can re-establish their niche with the tree hugging, granola eating, camping Subaru driver by offering hybrid wagons. Seriously. Zero landfill plant is nice, but those stereotypical Subaru drivers of the 80s and 90s want to have a direct impact. Hence all the of the Prius buying ya know.

Diesel fuel is now over $4.00/gallon where I live. If it continues to be more expensive than premium gasoline, that's gonna put a dent in the auto companies' plans to give us Diesel passenger cars (finally). People will look at the increased maintenance cost, plus the higher fuel cost, and Diesel will get a big "FAIL" again in the US.

 

Hello, VW? Where is your Diesel? Where is your Jetta wagon? Where is your Jetta wagon Diesel?

 

-- Steve

 

Maybe there will be push to lower the taxes on diesel that are higher than on gas. Diesel is cheaper to produce, so if taxes were equal it would have been cheaper.

 

Also, outside heating season, diesel usually costs about the same what regular gas does.

 

Diesel ftw from gas economy point of view. And what increased maintenance cost? Are you on crack? Diesels are cheaper to maintain. Just change the oil regularly and they last forever! Even no spark plugs to change.

This is sad... They really need to get better designers. Most of their cars are butt ugly. (Except my 08 Legacy GT of course )

...push to lower the taxes on diesel that are higher than on gas....

 

Lowering taxes?? I have never heard of such a thing

They are complaining that there is no light at the end of the tunnel, that Subaru has no real direction to produce products that will recover it from it's slump...

 

Yet Toyota can't build a sporty car with it's "biggest in the world" aspirations and resource pool, and is diverting FUJI HEAVY resources toward such a product, AND AWAY FROM PRODUCING NEW SUBARU BRANDED PRODUCTS!!!

 

HOW ABOUT YOU LET SUBARU BUILD SUBARUS, YOU TOYOTA MORONS!!! Your reliability ratings are sinking like a stone, and you've grenaded almost every sporty product you've ever had. NOW you complain that Subaru is not performing, as you suck them dry?

 

And FHI/Subaru has made some of their own bed, too, in approving designs that aren't compelling, and relying on reputation and techical details to sell, while overlooking the design of the car. (hard when people form opinions about others by impressions of the choices they make, including their taste in cars... Sorry, but it's true.)

 

Subaru needs to get the LEAD out, and produce some compelling products.

 

And TOYOTA needs to back the hell off and let that happen, without sucking up FHI's limited resources, and then complaining about it. If ANYTHING, TOYOTA NEEDS TO BE HELPING FHI OUT, not SUCKING THEM DRY!

 

That doesn't even approach Toyota horning in on the Outback with the "Venza" piece of trash. I am sure they favor RAV4 and Highlander over Tribeca every day of the week, too, and twice on sunday.

 

IDIOTS.

 

It galls me that such a compelling product as the Subaru Legacy is largely ignored by Subaru, especially in America, and Subaru itself may be sunk by the company producing the LEAST COMPELLING PRODUCTS ON THE MARKET. Maybe if SIA would build some compelling Legacy options, rather than one more bland camry.

 

When I think about what cars I want to own, not a single one of them are current toyotas, scions, or Lexus. The only toyota I actually do want to own is more than a decade old, the SW20 2nd-gen MR2, which Toyota has long since abandoned/let fail. Something they built when they were still "hungry."

How about they tell the american people that subarus exist? in something called COMMERCIALS. preferably effective ones...

 

people cant buy something they dont know exists...

Lowering taxes?? I have never heard of such a thing

 

 

Too bad that the ethanol lobbies have their hands in the pockets of politicians. You remember all of those farmers with tons of land and nothing to grow? Now, with the new false hope of ethanol, these farmers can plant thousands of acres of corn and our midwestern states are becoming the new middle east of ethanol. The farmers have numbers behind them which gives them tons of influence (and money to bribe dirty politicians) and the ability to convince those in power to tax the hell out of low-sulfur diesel.

 

Meanwhile, it takes more energy (mostly provided by fossil fuels) to convert the corn into ethanol and transport than conventional gasoline and diesel. Diesel fuel is in a less refined state than gasoline and should be about 10% cheaper than regular gas. I am saddened every time I drive by a gas station, especially now that we have clean diesels that produce less emissions than their gasoline counterparts and mileage comparable to hybrids.

sorry to thread jack, by the way, just needed to get it off of my chest.

Toyota is doing a lot of stupid stuff, the JDM people are coming over here and making everything about numbers instead of quality and customer service. They see that boring people like boring cars so they make them, and have influenced Subaru to make them now too. So what if it appeals to a wider market, you are going to lose the ones you have to possibly get other ones, that does not make sense to me. Oh yeah and I am not on good terms with Toyota as my husband no longer works for them. I had to be nice when he did, but I have learned so much negative stuff about them via my husband that I will never buy one. Let me put it this way, quality and quanity don't usually go hand in hand, and that is the future of Toyota.

I think the article hit it well "Nobody cares". Nobody cares that its a boxer engine and nobody cares that its symmetrical AWD. Why? Because they don't know its better. They can get "AWD" from any company now and better fuel economy than the boxer so why will they bother?

Those were their two big gotcha's. Now with everybody at the party Subaru is stuck between a rock and a hard place, spend what little profit there is to develop higher mpg's, create newer engine tech, put more standard equipment into the cars without raising price, and create commercials. Or spend no money and hope they can survive and Toyota will somehow rescue them.

 

Poor bastards

once every manufacturer came out with AWD, Subaru was screwed. Most people dont' research into the various types of AWD.

And what increased maintenance cost? Are you on crack? Diesels are cheaper to maintain. Just change the oil regularly and they last forever! Even no spark plugs to change.

 

I don't know, are you living in 1974? Most modern gasoline engines are pretty much maintenance free for 90-120k, except for oil changes. No fuel filter to replace, timing belt at 100k, spark plugs at 100k (except for turbo Subarus). Oil change intervals of 7500 or more, etc.

 

Diesels require more frequent and more expensive oil changes than gasoline engines these days. The last version of Diesel that VW sold here requires a $35 + labor fuel filter every 20k and a timing belt at 80k.

 

-- Steve

I think you're living in 1970s with your irrational American anti-diesel bias.

 

Good luck with 7500 oil change intervals if you intend to keep the car long.

 

And Subaru diesel does not have belt.

I think you're living in 1970s with your irrational American anti-diesel bias.

 

Good luck with 7500 oil change intervals if you intend to keep the car long.

 

And Subaru diesel does not have belt.

 

Wow, I never thought you were such a dickhead until this thread. I am sorry if I offended you with the 1974 comment, but YOU started it with the crack comment.

 

I think you completely missed my point. I am not anti-Diesel, but I am in favor of making gasoline and Diesel vehicles of similar GVWR meet the same emission standards. I would certainly consider buying a Diesel powered passenger car, when/if they ever become available in the US from anyone but MBz. I am disappointed that VW has failed on bringing in both the Diesel and the Jetta wagon so far.

 

POINT---> As long as Diesel is more expensive than regular gas (and it ALWAYS is in CA), Diesel passenger cars are going to be a tough sell in the US to the majority of consumers (not enthusiasts). The cars will cost more initially, probably at least $2000 depending on the manufacturer. At first, they will be limited production, so the dealers will tack on "additional dealer profit" and sell every one they can get their hands on. They require additional and more expensive maintenance than a comparable gasoline fuelled car.

 

No, I don't follow the 7500 mile service interval. I change the oil somewhere between 3-4000 miles. I have been doing this on every vehicle I have owned for the 31 years that I have been driving.

 

If you want to compare the cost of ownership, you have to compare apples to apples with the manufacturer's maintenance schedule. Honduh's oil change intervals are up to 10,000 miles with a filter replacement every 20,000 on some models now.

 

-- Steve

Subaru's AWD was unique at one time- not anymore. Even as a nich marketer they need to do something or offer something that other makers dont. Say the diesel Legacy.

AWD and Boxers alone are not enough anymore. AWD= avaiable anywhere and Boxer motor = people dont care.

Wow, I never thought you were such a dickhead until this thread. I am sorry if I offended you with the 1974 comment, but YOU started it with the crack comment.

 

I think you completely missed my point. I am not anti-Diesel, but I am in favor of making gasoline and Diesel vehicles of similar GVWR meet the same emission standards. I would certainly consider buying a Diesel powered passenger car, when/if they ever become available in the US from anyone but MBz. I am disappointed that VW has failed on bringing in both the Diesel and the Jetta wagon so far.

 

POINT---> As long as Diesel is more expensive than regular gas (and it ALWAYS is in CA), Diesel passenger cars are going to be a tough sell in the US to the majority of consumers (not enthusiasts). The cars will cost more initially, probably at least $2000 depending on the manufacturer. At first, they will be limited production, so the dealers will tack on "additional dealer profit" and sell every one they can get their hands on. They require additional and more expensive maintenance than a comparable gasoline fuelled car.

 

No, I don't follow the 7500 mile service interval. I change the oil somewhere between 3-4000 miles. I have been doing this on every vehicle I have owned for the 31 years that I have been driving.

 

If you want to compare the cost of ownership, you have to compare apples to apples with the manufacturer's maintenance schedule. Honduh's oil change intervals are up to 10,000 miles with a filter replacement every 20,000 on some models now.

 

-- Steve

 

Is name calling a typical part of your way of discourse?

 

In Europe Subaru did not added premium for diesel vs. gas. Of course remains to be seen if that's the same here.

 

Maintenance cost you need to factor into the whole useful life of the engine, which historically has been double (for good diesel manufacturers, such as Toyota or MB) of equivalent gasoline engines.

 

How 300k repair free miles sound to you? Remains to be seen how long Subaru diesels last, though, but I would think they would have done a good job.

 

My point is - for cost-conscious customer diesel is a win, especially for those who put many miles. Whether American customer will be convinced it's entirely different story.

<html>

<title>I told you so</title>

<rant>

I told you so!!!!

 

sorry.. I had to say that.. I was ranting on how toyota's theft of FHI would mean the end of subaru as we know it.. they have invaded our factories confiscated our balance sheets and now they are ragging on us for what makes us better than them!

 

to hell with toyota! it sounds like the author of this article's recommendation is that subaru should abandone their "unconventional" engine and powertrain for the same low power farty sounding FWD GARBAGE! A society of brown bag sedans..

 

all I can say is COLD DEAD HANDS!

 

+1 on the idea that something UNIQUE has a market.. its the fact that it IS UNIQUE! they just need to ADVERTISE THIS! not advertise "hey we're just like everone else!" cos you know what.. when joe WORTHLESS accidentally parks in the subaru dealership thinking hes going to buy a scion, and he sees the new imprezza hes gonna go "goly gee whiz beaver.. why is this average sedan 28k when I can buy a corolla and HAVE A CHEF CUT UP TOXIC FISH WHILE I AM DRIVEN AROUND FOR 16K?" or maybe "wow.. I betI couldn't rescue my wife from people who are more talented than I am 35 miles away when some rich guy at a mansion gives me a gallon of gas in this car!"

 

the fact is AWD and REAL engines come at a cost of fuel economy and price... but these things are what makes the car BETTER than the average trash.

 

</rant>

</html>

Someone else pointed this out but it needs to be repeated. Subaru designs have been very lackluster/ugly lately. I found myself looking at the new Mitsubishi ralliart the other day and hoping for one over a WRX. While I'm the loyal Subaru customer that Subaru depends on. I've owned 6 or 7 subarus in my adult life and I've never been without one between me and my wife. The new crop are UGLY, except the legacy which is up for redesign next.

 

Also, Subaru never updated their very small design. As American's get fatter they can't fit into small Japanese vehicles. Try getting into an early forester/impreza while weighing 250+ lbs., it's pretty difficult. The new forester has put Subaru on the right track. The looks are okay but the interior is HUGE compared the old style foresters. I just hope they redo the Impreza before it's too late. I also hope they don't screw up the legacy/outback, it's the last new Subaru I can buy and not feel like I bought something horrible looking.