Subaru to Expand U.S. Capacity as Rising Demand Surpasses Output

Fuji Heavy Industries Ltd. (7270), the maker of Subaru cars, will invest $400 million to boost U.S. capacity by the end of 2016 as demand rises for its vehicles including the Forester SUV and XV crossover.

Fuji Heavy will use an existing line at its Lafayette, Indiana, factory to increase output to 400,000 units, and will also begin producing its Impreza model at the plant, President Yasuyuki Yoshinaga said in Tokyo today. The company previously targeted output of 300,000 units by 2014.

Shares of Fuji Heavy surged to the highest level in almost four decades after the automaker forecast operating profit will jump 50 percent to 180 billion yen ($1.8 billion) in the year ending March 2014, helped by demand in the U.S. The Tokyo-based carmaker also plans to hire 900 people for the Lafayette plant as it now sells more vehicles in the U.S., its largest market, than it makes locally.

U.S. deliveries will rise about 8 percent to 385,000 units this fiscal year, Fuji Heavy said. That’s 51 percent of global deliveries of 752,000 units, according to company figures.

Fuji Heavy gained 2.1 percent to 1,898 yen in Tokyo trading, the highest close since at least 1974.

Net income will probably decline 8 percent to 110 billion yen in the year started April 1, while sales will rise 7.2 percent to 2.05 trillion yen, according to the statement. That compares with analysts’ projections for profit and revenue of 116 billion yen and 2.08 trillion yen respectively, based on the average of 18 estimates compiled by Bloomberg.

Profit Surges

Net income at Fuji Heavy more than tripled to 119.6 billion yen in the year ended March, and sales climbed 26 percent to 1.91 trillion yen.

Fuji Heavy shares have advanced 76 percent this year. The stock more than doubled in 2012, the best performer on the Nikkei 225 Stock Average. Tensions over a territorial dispute disrupted production by some of Fuji Heavy’s Japanese rivals last year in China, where the automaker doesn’t have factories.

The carmaker, 16 percent owned by Toyota Motor Corp. (7203), has allocated about a third of its 300,000-unit U.S. capacity to make Camry sedans for Toyota. Yoshinaga has said he will maintain the production contract.

The Lafayette plant opened in 1989, initially as a joint venture with truckmaker Isuzu Motors Ltd. (7202) It currently makes Outback wagons, Legacy sedans and Tribeca SUVs as well as Camry sedans for Toyota under contract.

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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