North Star

Fuji Heavy eager to discuss Toyota Camry contract

Bloomberg

Fuji Heavy Industries Ltd. President Yasuyuki Yoshinaga said the maker of Subaru cars is preparing to begin talks to renew its contract to build Camry sedans, the best-selling car in the U.S., for Toyota Motor Corp.


Joint platform: Fuji Heavy Industries Ltd. workers assemble a Toyota Motor Corp. 86 sports coupe on the Subaru BRZ-Toyota 86 production line at FHI's plant in Ota, Gunma Prefecture, on March 16. BLOOMBERG


While the company has orders to build the Camry until the model is overhauled in about four years, Fuji Heavy doesn't know whether Toyota will retain its services for the next generation of the midsize sedan, Yoshinaga said this week.

Fuji Heavy, which uses about a third of its U.S. manufacturing capacity for the Camry, needs to know soon to determine its own expansion plans, he said.

"My hope is that we can have a decision about the future direction within this year," Yoshinaga said. "We would like to maintain Camry production."

Renewing the deal would extend Subaru's reliance on Toyota as the European crisis, slowing Chinese economy and the strength of the yen threaten earnings growth.

For Fuji Heavy, dropping Camry manufacturing would give the company room to expand production of its more profitable Suburu Outback sport utility vehicles and Legacy sedans in the U.S. without having to build another factory.

"They may want to focus on producing their own vehicles if they think of the short-term benefits," said Mitsushige Akino, who oversees about $600 million at Ichiyoshi Investment Management Co. "But it's more important to lay a solid foundation for the business in the longer term."

Toyota spokesman Joichi Tachikawa said he couldn't immediately comment on Fuji Heavy's future production of the Camry.

Yoshinaga, 58, also said Fuji Heavy will propose developing more automobiles with Toyota to build on the success of their latest sports car — called the BRZ for Subaru and 86 for Toyota.

The move would deepen a partnership that began in 2005 when Toyota bought 8.7 percent of Fuji Heavy. It raised the stake to 16 percent three years later. This year, they started selling a codeveloped sports car and Subaru plans to begin offering its first hybrid vehicle — based on Toyota technology — in 2013.

Fuji Heavy has been devoting some of its capacity, 37 percent of its total in the U.S. last fiscal year, to make the Camry for Toyota since 2007.

Still, Fuji Heavy is allocating some of its factory space to Toyota at the expense of its Subaru-brand cars. Because of the shortage of capacity in the U.S., Fuji Heavy is cranking up production in Japan, making itself more vulnerable to the yen.

The Camry generates operating profit margins of about 2 percent to 3 percent for Fuji Heavy, while the Subaru Legacy and Outback yield margins exceeding 10 percent, according to estimates by Koichi Sugimoto, a Tokyo-based analyst at BNP Paribas SA.

Fuji Heavy plans to increase Japanese production this fiscal year to account for 78 percent of total output, the highest proportion in the industry. The company is doing this at a time when companies from Toyota to Nissan Motor Co. and Mazda Motor Corp. are expanding overseas to escape the yen.

Fuji Heavy also plans to pursue cooperation with Toyota by proposing to expand the lineup of their jointly developed sports car, Yoshinaga said.

Subaru sold 3,551 BRZs in Japan in the first two months, almost quadruple the company's initial target, and is starting sales of the two-door coupe in the U.S. this year. People placing an order now will have to wait until next March to get the car, he said.

"Since the BRZ/86 is so popular, it's natural to consider expanding the lineup," he said. "For example, adding a BRZ sedan."

Fuji Heavy hasn't always benefited from its ties with Toyota. In May it revised its midterm plans after it failed to win Chinese government approval to build a plant in the country, which would allow the company to avoid a 25 percent import tax.

China didn't approve Fuji Heavy's application to form a venture with Chery Automobile Co. because the government views such a move as tantamount to giving Toyota a third partnership in China, exceeding regulatory limits, three sources said last year. Toyota has ventures with Guangzhou Automobile Group Co. Ltd and China FAW Group Corp.

North Star

Two things:

1. I didn't know FHI was building Camry's out of their plant in the US

2. I LOVE that the BRZ is already doing well enough that the company wants to consider expanding the line to a sedan.

charliec225

OR...

(and this is crazy, but just hear me out)

Instead of adding more doors and weight, they could add more power.

That is all.

North Star

I have no doubts that the BRZ itself will evolve with more power over it's generations.

charliec225

Yeah, I guess they see adding a sedan as expanding the potential market for the vehicle, which I understand from a business perspective. From the enthusiast perspective though, you just ruin the body lines and add weight...

Glad the car is doing well though. Hopefully the other manufacturers will follow suit if it is successful and we'll finally see some fun little RWD cars in the market again.

deepbluejh

You're joking, right? They offer a 3.5L V6 with 268HP that Car and Driver got to go 0-60 in 5.8 seconds. Regardless, the take rate on the V-6 model is very low (about 20%). Adding more power will appeal very little to the kind of people who buy these cars.

TheDonEffect

You're joking right? I think when people think more power in these cars they're thinking turbo not v6.

Diversifying the product makes alot sense imo, I'm sure they'll find more butts for a comparably priced sedan vs. a more expensive turbo version and will be more profitable. I mean, it'd be cool to have a small rwd sedan marketed as a scion, think old datsun 510 kinda deal. I'd still much prefer the coupe, but I understand the appeal, I just hope when they style it they just dont stretch it out the frs.
It seems like a turbo version seems less and less likely. Consider if Subaru were to offer one, how would it lineup against the wrx or sti? Will they sell it stripped down or with alot of options, likely the latter. The BRZ is in the upper 20K range as it is, so a turbo would bring it firmly to 30K, probably a bit more. Now its competition won't be the smaller siblings (V6 stang/camaro, I4t gen) or other fwd hot hatches, now it will be competing price wise against 420hp mustangs, 345hp gen coupes, Zs, R32s, etc. More power will also mean more weight, brakes, and tires, some turbo lag, so some of the driving experience will be diluted. It will also compete against the wrx and sti, the cars that define their company... and will also open the door for toyota to directly compete against it as well.
The more and more I think about it, the more I see the car, sit in it, contemplate ownership, the more I'm starting to think that they should just keep it a low powered welterweight. For 30K+ it will need to bring more than just feel as there are great cars in that price range, like the Z which offers over 300hp, great driving dynamic, a more not so highschool upscale look, etc. Or the STI, which offers utility, awd, and blistering performance. At its current price point, it's still stretching to justify its price but was able to manage it by being the only game in town of offering uncompromised driving dynamics since it's competition is primarily fwd hot hatches and smaller sibling gt sportscars that really shine with their bigger brother engines.
Don;t get me wrong, alot of people I'm sure like the idea of a turbo version of it, but the reality is that they also hope it will be well under 30K bringing at least 250hp to the party. Given the pricing on the cars at this time, I just don't see that happening. Either it will be priced right but with a smaller, underpowered engine, or priced alot higher. Another thing to note is the success of the car beyond this year. I remember when the TC came out in 2005, around here it was a struggle to find one anywhere on the lot, let alone buy one. My roommate waited 3 months for his and we contacted every dealer within 50miles, and this was a more highly produced car. I'm stunned to see FRSs sitting on lots, granted selling quickly as the last one I saw was already doing paperwork. and subaru dealers around here still taking in orders as their waitlists still aren't filled. I could buy an FRS in virtually any color except blue in a manual for a few hundred over msrp since they're tacking on the clear bras and such right now at a dealer within 30 miles from where I'm sitting. Only a couple BRZs though, lol, but its also a struggle to find WRXs too. I already talked to a dealer and asked if I requested a silver one in stick with no dealer add ons for msrp they'd make it happen with no fuss at all. One guy in san jose just bought a BRZ below msrp since a buyer flaked. Your results may vary.
If actual demand for this car was high enough, I'm sure the plans would've already been in place, but I really believe the market isn't quite there. Note how subaru hasnt made a impreza coupe since 2001. I think subaru understands that oen of the main selling points of the wrx/sti models is all the performance and all the utility, but if you want a sexier car (let's face it, coupes really arent that much lighter than sedans these days and with the impreza <2001 it was like 15lbs difference so people only really want it for the looks) you'd be looking elsewhere. The fact that a sedan version is already rumored sorta solidifies this notion. Also, looking at mazda and the miatas success without having to up power plays to that theory. Subaru could've made a rwd version of the wrx and sti without having to make the brz platform, so what's the point in making two similar platforms just to save a few hundred pounds if that?
As far as toyota goes, one thing I know they mustve learned from the celica all trac, mr2 turbo, and supra is that consumers will buy quality, but people still need value. All of those models delivered on what people wanted but the sticker price for alot was too much, and sales slumped. So unless your intention is for it to be a low production, loss leader type of product (think veyron, LFA, etc) or not break even for quite awhile and even then not make a whole lot of money (s2000), then making it doesnt make a whole lot of business sense.

deepbluejh

Wait, I was talking about adding more power to the Camry. What are you talking about?

charliec225

I was replying to the highlighted text that was discussing the BRZ:

"Since the BRZ/86 is so popular, it's natural to consider expanding the lineup," he said. "For example, adding a BRZ sedan."

WolfpackS2k

Sweet Jesus man, Charlie was talking about the BRZ not the Camry.

^^^and there's no way I'm reading that wall of text.