High-riding Subaru boosts profit projections, increases Indiana production

While other automakers' sales were in the doldrums last year, Japan's Subaru managed to crank up sales and market share globally - a trend the company says it expects to continue into 2011. As a result, Subaru's parent, Fuji Heavy Industries, has forecast a 57 percent increase in annual operating profit for its current financial year - and it will boost production at its sole overseas assembly plant in Lafayette, Indiana.

Subaru says that improvements to its cost structure - which has long been among the highest in the industry - and strong demand for its products will help it post an operating profit of 43 billion yen ($474 million) and a net profit of 23 billion yen ($250 million) in the 2010/2011 financial year that ends next march.

Much of the automaker's projected positive financial news comes as a result of strong demand for its products, particularly in North America. Subaru says that it will increase production at its Lafayette, Indiana, assembly plant from 100,000 to 130,000 units annually - and the company is considering adding even more production. Subaru Indiana of Indiana Automotive is the company's sole overseas production facility and it builds the automaker's popular Legacy and Outback models - two models that, along with its Japanese-built Forester, have consistently driven the brand's sales upward over the last 18 months.

Yet Subaru of Indiana might not be the company's only non-Japanese plant for long. Subaru CEO Ikuo Mori hinted to reporters that a Chinese plant for the world's largest and fastest-growing market is under consideration.

"We are working on an outline for a new midterm plan, and will announce details when they are ready," Mori said.

Toyota investment pays off
After General Motors divested its share of Fuji Heavy Industries in 2005, Toyota bought more than 8 percent, eventually increasing its investment to 16.7 percent. As a result, Subaru gained access to the "Toyota Way," a low cost, high-quality manufacturing system.

Thanks to the implementation of Toyota's manufacturing techniques, Subaru has greatly reduced its assembly and distribution costs.

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