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Fuji Heavy Pushes Back Decision on Increase in U.S. Capacity

Fuji Heavy Industries Ltd. (7270)’s president said the Subaru carmaker delayed making a decision on its U.S. capacity expansion as slumping demand in China and Europe gave the company more room to ship vehicles to America.

The company will decide on the matter by the end of the fiscal year ending March, instead of the previous plan to do so by the end of December, President Yasuyuki Yoshinaga said in an interview at the company’s Tokyo headquarters yesterday. Fuji Heavy will probably choose an “incremental” expansion in U.S. manufacturing rather than building a new factory, he said.

The comments illustrate how the slump in Chinese demand for Japanese products -- fueled by a diplomatic row between the two countries that flared in September -- is interfering with global strategies. Auto-parts makers from Koito Manufacturing Co. to Sumitomo Electric Industries Ltd. (5802) have said they’re considering stepping up their expansion in regions such as Southeast Asia to counter the risk of conducting business in China.

Fuji Heavy shares have almost doubled this year, the best performer on Japan’s benchmark Nikkei 225 (NKY) Stock Average, as the automaker’s lack of manufacturing plants in China shielded the company from the sales slump in the country relative to Toyota Motor Corp. (7203), Nissan Motor Co. (7201) and Honda Motor Co. (7267) The stock rose 2.9 percent to close at 918 yen yesterday in Tokyo.

Photographer: Akio Kon/ Bloomberg

Yasuyuki Yoshinaga, president of Fuji Heavy Industries Ltd. Close

Yasuyuki Yoshinaga, president of Fuji Heavy Industries Ltd.

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Photographer: Akio Kon/ Bloomberg

Yasuyuki Yoshinaga, president of Fuji Heavy Industries Ltd.

U.S. Boost

Yoshinaga, 58, said the company coped with declines in China and Europe by diverting shipments to the U.S. and Japan, where sales have been rising. He ruled out Fuji Heavy, which allocates some of its U.S. capacity to make Camry sedans for Toyota, would scale back those ties in the company’s next expansion plans.

Fuji Heavy expects to sell 348,800 cars in the U.S., its largest market, during the current fiscal year. The company is counting on demand of the Legacy and Forester sport utility vehicles to drive growth next year.

Fuji Heavy may sell 400,000 vehicles in the U.S. in the fiscal year ending March 2016, exceeding an earlier forecast for 380,000, Takeshi Tachimori, chief of Fuji Heavy’s U.S. unit, said in June.

Not all models are doing well. The carmaker is considering discontinuing production of the Tribeca SUV, Yoshinaga said. Subaru sold only 2,800 units of Tribeca last year in the U.S., compared with 146,000 units of the Legacy SUV.

In Japan, the company has said it will increase production at its main domestic plant in Gunma Prefecture by 20 percent to 180,000 vehicles by the summer of next year. Government subsidies helped boost domestic sales by 30 percent to 47,528 vehicles for the six months ended September, led by the Legacy and Impreza, according to the company.

In China, Fuji Heavy saw sales through the end of November tumble 27 percent to 39,602 units, resulting in the company piling up as much as six months’ worth of inventory. Inventory will return to normal levels by March, Yoshinaga said.

Still, the company -- the only major Japanese automaker not to have received approval to manufacture vehicles in China -- isn’t giving up on the country yet, Yoshinaga said.

To contact the reporters on this story: Ma Jie in Tokyo at jma124@bloomberg.net; Yuki Hagiwara in Tokyo at yhagiwara1@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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