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On September 14 at Tokyo American Club, Fuji Heavy Industries President and CEO Yasuyuki Yoshinaga took luncheon attendees on a journey through the history of Subaru, which will celebrate its 100th anniversary in 2017.

While the average American may not know Fuji Heavy Industries (FHI), they certainly know Subaru, FHI’s signature car brand that has been highly successful in the United States. All-wheel drive cars such as the Legacy, Outback, and Forester are popular in the US market, where 60 percent of all Subaru vehicles are sold.

As Yoshinaga explained, a big reason for the company’s success is its focus on safety. Whereas many automakers cover a wide spectrum of vehicle types and designs, Subaru’s mission is to support the safe driving of its customers.

SMALL BUT STRONG
Although Subaru is small—it is the world’s 22nd largest automaker, and Japan’s 7th—the brand has built a solid business by staying tightly focused on its mission.

With only a one-percent share of the global automotive market, it can be challenging to keep employees—especially younger ones—enthused. During the presentation, Yoshinaga talked about how some young employees felt the company had no strengths. They were looking at a market in which Toyota sold 10.15 million cars globally in 2015, whereas Subaru sold 960,000.

These sales figures are only part of the story, however. They represent a 7 percent increase year-over-year and marked a fourth consecutive annual sales record for Subaru. Additionally, Subaru’s operating profit margin ratio, which was -0.4 percent in 2008, is now 17.5 percent.

Yoshinaga says he takes pride in these numbers. “We can’t really go into all the markets in the world, and we can’t meet all the regulations in different countries,” he explained. “We cannot win by volume. This is not the kind of battle we want to be in.”

THREE KEYS
How did the brand achieve such a transformation? Yoshinaga points to the three key strategies that guide Subaru: selection and focus; differentiation; and added value.

These strategies grew out of internal discussions to address the feeling that the company had no strengths. By going back to FHI’s origins in the aerospace industry, they realized that their expertise in building aircraft put them in an ideal position to deliver the safest cars. They decided that they wanted to develop cars about which people could feel a sense of security.

Honing in on this goal meant focusing on a smaller lineup. So, in February 2012, Subaru stopped doing something it had been doing since 1953: building mini cars. While this type of vehicle is important for the Japanese market, the resources spent on the task could be better put toward the pursuit of creating the safest cars for the US market. This was a big decision for the company but, as Yoshinaga pointed out, was irrelevant for customers.

Mini cars sold today in Japan under the Subaru brand are made by Daihatsu.

With this tighter focus on its core lineup, Subaru settled on safe and secure, as well as enjoyment and peace of mind, as its selling points. These qualities were new to the brand. But because the message had not yet sufficiently reached customers, the company sought independent testing to demonstrate safety and help spread the word. It worked. All Subaru models were named Insurance Institute for Highway Safety (IIHS) Top Safety Picks in the United States each year from 2009 to 2015.

The second strategy—differentia-tion—falls more in the realm of marketing. Those familiar with US television commercials have probably heard the slogan: “Love. It’s what makes a Subaru a Subaru.”

This stems from the idea that three elements—owner, life, and vehicle—come together to equal love. In the US market, Subaru shows through its messaging how its vehicles are a part of life, especially for those who love the outdoors, road trips, and camping. These are all activities that require safety. In Japan, the slogan is “Cars carry the lives of human beings.”

The third strategy is incentive and added value. When encouraging young employees to see the strengths of Subaru, Yoshinaga highlighted the fact that the brand was retaining as many as 500,000 customers each year. He asked why, and concluded that confidence in safety was key.

But to maintain and grow this number requires incentive and communication with customers. Yoshinaga admits: “The service environment has not caught up. We have to enhance this area. When the customer buys their first car, I want them to feel that they want to buy a Subaru again.”

To this end, he says, Subaru is working to improve service. Rather than trying to increase the number of dealers, as some automakers have, they are building strong relationships with existing dealers.

THE FUTURE
Next steps for the automaker include a rebranding that may go unnoticed by the consumer. On April 1, 2017, FHI will formally change its name to Subaru Corporation.

When it comes to the cars themselves, Subaru has fully overhauled the chassis that will be used across its lineup. While some manufacturers do this to streamline production and reduce costs, Subaru is doing it to further improve safety. The 2016 Impressa is the first model to use the new chassis.

The current Eyesight Driver Assist Technology will evolve into a system that will enable automated driving on highways, including lane changing, by 2020. However, they are not developing driverless vehicles. The purpose of Eyesight is to enhance safety and assist the driver.

Lastly, to facilitate its next target of 1.2 million annual sales, the company is increasing production capacity at its Lafayette, Ind., plant from 210,000 to 394,000 by the end of this year.

Compared with Toyota’s 10.15 million, a sales target of 1.1 million may seem modest. But as Yoshinaga said in closing: “We are not a global company. We only have factories in the United States and Japan, and 76 percent of our cars are produced in Japan. The rest are produced in the United States. Porsche and Mercedes make 99 percent of their cars in Germany.

“If we wanted to be a global company, the kind of strategy we have would not be valid. If you need to produce your cars in many places around the world, you may not be able to be so specialized.”

Remaining small allows Subaru to accomplish its mission of supporting the safe driving of its customers, and to remain financially strong along the way.

Christopher Bryan Jones is Editor-in-chief of The Journal. Originally from Birmingham, Alabama, he has lived in Japan since 1997.
A big reason for the company's success is its focus on safety . . . Subaru's mission is to support the safe driving of its customers.