Subaru Increasing Japanese Production Despite Exchange Rate Fears

Rather than expand production in North America, Subaru is taking a contrarian route and expanding their manufacturing in Japan – even as everyone is scrambling to get out. According to Automotive News "A large-scale expansion in the U.S., where we build new factory buildings and such, will cost a lot," Chief Financial Officer Mitsuru Takahashi said in a May 18 interview in Tokyo. "We're not like Toyota, Honda or Nissan, so it's not appropriate for us to make sudden, big investments." The move comes with a planned 28 percent boost in Japanese output by March, 2013 while cutting U.S. output by 1 percent. Subaru is betting that a weakening yen will help increase profitability – Takahashi's own outlook is of a drop in the yen over the next decade – but as of now, Japanese automakers can't build North American factories fast enough. Subaru recently lost a bid to begin a joint venture with Chery in China, and will now be forced to import cars and face a 25 percent duty on each one. That resulted in Subaru shifting their focus to American, where the brand has seen strong growth. Although Subaru has a U.S. manufacturing presence (and Subaru decided that, even with the strong yen, it's more cost-effective to expand in Japan) an erratic yen could wreak havoc on Subaru's profitability, ala Mazda – but  by the same token, Subaru's bet on a weaker yen could also pay off handsomely. The nature of the auto business in today's world is that long-term decisions must be made in a world where events like last year's tsunami can turn one's world upside down in a very short time frame. We'll just have to sit tight and watch how Subaru's bet pans out. from The Truth About Cars http://www.thetruthaboutcars.com

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