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  • Subaru might be one of the strangest success stories in the history of the American

  • automotive market. A small, scrappy Japanese brand that started as a division of an

  • industrial conglomerate, was brought to the states by a couple of American businessmen in the

  • 1960s, and quickly met with ridicule.

  • But it persisted, and over the decades, it has gone from being a tiny niche player

  • to one of the most successful brands in America.

  • It's an interesting company.

  • We've been around for 53 years.

  • The company started out with this little car called the

  • 360 and it got declared unsafe by Ralph Nader in

  • 1971. And then the company almost goes out of business.

  • Subaru's sales steadily increased during most of the last decade as it reaped the

  • benefits of its unique products and marketing strategies.

  • It weathered economic recessions far better than much larger competitors, and it is positioned near

  • the top of consumer satisfaction surveys, sometimes totally dominating them.

  • So it's been quite a quite a roller coaster.

  • But what's really been interesting for me anyway is how we've been able to stay so consistent

  • really over these last 12 years or so in terms of maintaining our business and having it

  • grow. But it faces challenges.

  • Ramping up production to meet soaring demand is not easy for a smaller manufacturer, and

  • Subaru has been hurt by the occasional recall.

  • It also has to keep up with the ever changing auto market, including by developing electric

  • vehicle technology.

  • A challenge for a small automaker.

  • Subaru has tasted both wild success and bitter struggle.

  • Can it hold on to its current good fortune?

  • Subaru was an automotive brand created by the Japanese conglomerate Fuji Heavy Industries,

  • the Subaru name is the Japanese name for the Pleiades star cluster, what the brand's logo is meant to

  • represent. According to the company, the six stars of the cluster represent the five companies that

  • joined to form the one Fuji Heavy Industries.

  • In 1958, it released the Subaru 360, a small car that bore some resemblance

  • to European vehicles such as the Fiat 500 and the Volkswagen Type Two, also

  • known as the Beetle. The brand came to the U.S.

  • in the 1960s.

  • Businessman Malcolm Bricklin bought a contract to sell Fuji's Rabbit scooters in the U.S.,

  • only to be told by the company that it was discontinuing scooters.

  • Bricklin went to Japan to protest that he had been cheated, but he saw a couple of cars there,

  • including the 360.

  • At 960 pounds, it was just light enough to avoid the federal regulations governing the sale of

  • cars, which applied to vehicles 1,000 pounds or more.

  • Panned by critics, but less costly than more popular alternatives, the company actually

  • marketed the 360 in the U.S.

  • under the slogan "Cheap and Ugly Does It".

  • The FF-One, which came out in 1970, was the first car to feature Subaru's

  • Boxer engine. Already in 1972, Subaru had its first public

  • offering on the New York Stock Exchange at an opening price of three dollars.

  • That same year, 1972, it took a big step toward destiny when it

  • released a four wheel drive wagon version of the Leone known in the U.S.

  • as the Subaru 4WD wagon.

  • It was the first time American buyers saw four wheel drive on a passenger car rather than a

  • truck. In 1977, Subaru came out with another model that would prove a favorite for

  • many. The bi drive recreational all terrain transporter, better known

  • as the BRAT. It was a two door, two seat, car truck fusion and

  • was aimed at buyers who had active outdoor lives.

  • The vehicle developed quite a cult following among a wide range of buyers.

  • In 1980, the company took yet another step that would help it establish a global reputation for

  • high performance and build a very loyal following.

  • It entered a team in the World Rally Championship.

  • Rallying is a form of racing where drivers move from one point to another rather than drive laps around a

  • circuit. And it often involves driving over varied terrain, including dirt, roads, snow, and some

  • obstacles. The 1987 Justy, a microcar brought with it a

  • continuously variable transmission.

  • At the time, an uncommon transmission found across Subaru's range today.

  • By the mid 1980s, Subaru was a Wall Street superstar, a much talked about stock that hit

  • a high just under thirty nine dollars per share.

  • But soon after that, Subaru fell into decline.

  • Reagan pursued a weak dollar policy in 1985.

  • Through 1986, we started to get massive pricing increases from our Japanese parent

  • company in Japan. So as a result of that, the cars ended up

  • increasing in price so dramatically over a short period of time.

  • We kind of lost our market.

  • And then we went down into this period, I call it the Valley of Despair from 1987 through

  • 1994, where we just couldn't figure it out.

  • Around that time, other Japanese manufacturers were competing pretty stiffly with the automaker and the

  • astronomical value of the Japanese currency hurt Subaru.

  • In 1990, Fuji Heavy Industries acquired the remaining half of Subaru of America shares it did

  • not already own for six dollars a share in cash.

  • In the 1990s, Subaru began to come into its own with a combination of products and

  • marketing strategies that persist to this day.

  • The legacy sedan, the first Subaru built in the U.S., was introduced in 1989.

  • The Impreza sedan followed in 1993.

  • Then in 1995, the company hit something that would later be seen as one of its biggest breakthroughs

  • the Outback.

  • The Outback essentially save the company.

  • The Outback started as a trim package for the wagon version of the legacy, with its

  • characteristic fog lights and roof rack, it was marketed as an alternative to popular

  • sport utility vehicles of the day from a brand that didn't have any true SUVs.

  • The Outback is a category straddling vehicle.

  • It is part wagon, part SUV.

  • Some people consider it one of the first true crossover vehicles, a category that has bloomed in

  • recent years. Subaru ran an ad campaign for the Outback with

  • Australian actor Paul Hogan, the star of the Crocodile Dundee movies.

  • The Forester followed in 1997, a similar looking model with a slightly taller

  • stance. It was also the decade when Subaru began to build fierce loyalty among

  • certain groups of customers.

  • One group that was considered a bit of a risk at the time, gay women.

  • The company discovered it had a loyal following among lesbians at a time when mainstream products

  • weren't marketed toward LGBTQ customers.

  • Subaru devised ads reaching out to them.

  • Print ads featured license plates that had references to the show Xena Warrior Princess

  • and an abbreviated form of Provincetown, Massachusetts.

  • The company also hired tennis player Martina Navratilova as a spokesperson.

  • Navratilova was one of the earliest major athletes to come out as gay.

  • The company also targeted other customer groups who seem to connect with Subaru for one reason or another

  • people who really liked the outdoors, dog lovers, fans of the disappearing station wagon,

  • and of course, rally fans.

  • And as with many automakers, Subaru has two sides to its business the passenger cars

  • plus the SUVs, and then the high performance vehicles.

  • At the same time, the company was building a reputation as a serious contender in the World Rally

  • Championship. Rally racing is not terribly popular in the United States, but Subaru's

  • success in it did ignite the passion of that contingent of auto enthusiasts who do know and

  • care about it. We dominate the rally scene in the United States today.

  • I think we've won like nine in a row or nine in the last 10 years.

  • We've won the U.S.

  • Rally Championship and we're into Rallycross with some of the partnerships that we

  • have through Vermont sports car and so forth to so rally racing is also a part of our

  • part of our DNA. And again, that's where you prove the technology, because the technology that's in

  • that car, it's in your Outback, it's in your Crosstrek, it's in your Ascent,

  • it's in your Forester.

  • Subaru introduced the WRX sedan to the U.S.

  • in 2001.

  • The WRX and the further sport tuned sibling WRX-STI have become

  • hugely popular as racing and enthusiast vehicles.

  • They were able to give their cars a identity or

  • at the very least align it with human identity, people that felt like they had a strong

  • identity and suddenly this car aligned with what they considered to be their identity.

  • A lot of car companies have tried to do that for decades, but Subaru seemed

  • really good at identifying which which people, which kind of

  • demographics, which lifestyle choices they could most easily appeal

  • to. Subaru has also had some memorable slogans over the years, including the beauty

  • of all wheel drive in the mid 1990s and of course, the highly successful campaign

  • that went by the tagline Love.

  • It's what makes a Subaru a Subaru.

  • To that end, Subaru has also become very involved in philanthropic work.

  • It is not unusual for an automaker to support charitable causes, but Subaru has emphasized

  • service and giving as selling points for the brand.

  • Subaru has partnered with groups like the American Society for the Prevention of Cruelty to Animals,

  • ASPCA and sponsored animal adoption events, often at its own dealerships.

  • There are a few technical traits that Subaru is well known for in the automotive world.

  • One is the boxer engine, a flat four cylinder engine.

  • It is called the boxer, because the pistons move horizontally, giving the appearance of two boxers standing back

  • to back and pumping their fists outward.

  • Subaru did not invent the flat four and is not the only automaker to use it.

  • Porsche is another company that uses boxer engines, but Subaru's commitment to the

  • boxer is practically unparalleled.

  • The engine is found in every single one of its vehicles.

  • The second bit of tech is the company's commitment to all wheel drive vehicles, something Subaru has been

  • serious about for decades.

  • All wheel drive is again not unique to Subaru, and it's not the first or only car company to

  • offer it. But Subaru was an early adopter and it was serious about equipping its vehicles with all

  • wheel drive. Since the 1970s.

  • This emphasis was a turning point for Subaru, it made the vehicles popular in regions with harsh weather

  • conditions such as the Pacific Northwest, the Rocky Mountain states, and the Northeast.

  • You saw a lot of these vehicles in those locations because it really appealed the sense of security that people

  • got that a good advertising campaign that I still remember.

  • You know, that phrase was the beauty of all wheel drive.

  • And they have all these commercials showing competitive vehicles slipping and sliding in their car, just driving

  • right through because of the drive effectiveness, I think that spoke to the people who lived in those areas.

  • And suddenly this car seemed to address exactly what they were looking for.

  • So we're located in Colorado Springs, Colorado, at essentially the base of Pike's Peak and the

  • mountain range. And Subaru has done really well in this

  • area. Thankfully, you know, we get all four seasons, although

  • sometimes they're a little short, sometimes they're not.

  • But the all wheel drive system has really kept people coming back

  • year after year to repurchase Subarus.

  • As of 2021, all of Subaru's models except the race focused BRZ come with all

  • wheel drive. Subaru's cars themselves are also distinct.

  • Several of their models, such as the Outback, Crosstrek, and Impreza Wagon, are all wagon or

  • wagon like vehicles in a market where wagons have all but disappeared.

  • That is compelling to customers who still want a car like vehicle that has some of the benefits of an

  • SUV. A

  • combination of a focus on practical category straddling vehicles and a marketing strategy that

  • focus on niches of passionate buyers has given Subaru an impressive position in the automotive

  • market. Consider this Kelley Blue Book's Brand Watch report is a consumer perception

  • survey that weaves in shopping behavior to determine how a brand or model stacks up with its

  • competitors on a dozen factors key to a consumers buying decision.

  • We know the 12 factors that are most important to consumers

  • when they're making a car buying decision and Subaru just is killing it on

  • that list, they own safety.

  • They jumped ahead of Honda and are second to Toyota on

  • durability and reliability, which is the most important factor.

  • In the Q4 2020 report, Subaru ranked among the top three brands in 10

  • of the 12 most important factors for consumers in making a decision to buy a vehicle.

  • A year ago, it was ranked among the top three brands, only in six categories.

  • It is now number two in quality/durability and the WRX and BRZ vehicles helped

  • it overtake Mazda in driving performance.

  • Subaru is also number one in safety and number two in almost every other category.

  • Very importantly, Subaru also tops KBB's resale value category.

  • That alone speaks volumes about the brand, the group says.

  • It has low inventories and it has high demand and

  • so they don't have to discount much.

  • You see among the lowest incentives always on Subaru

  • products. And so when you and they don't sell into many fleets.

  • So a bad combination for resale value is if you pump a

  • lot of vehicles into fleets, if you discount them like crazy, put a lot of incentives on

  • that hurts your resale value.

  • Subaru doesn't do anything of that.

  • Its growing reputation has led to some incredibly impressive sales streaks, even in times when the rest of the

  • automotive industry and the larger economy were struggling, such as the recession spurred by the financial crisis

  • of 2008. Automakers such as General Motors and Fiat Chrysler had declared bankruptcy

  • and many others stumbled.

  • But during this time, Subaru was posting sales increases.

  • When the financial crisis hit, we just grew right through it.

  • Other manufacturers were extremely hurt by that.

  • But we were able to, because of the things that we had done to price reposition,

  • create value that was in our products, we were able to continue to grow even through the financial crisis.

  • Of course, there are still things that keep its dealers up at night.

  • Subaru's challenge now is maintaining the momentum.

  • Its 93 month sales streak broke in September of 2019 before the coronaviruses

  • pandemic. Higher demand has raised some questions about whether Subaru can keep up

  • production. The company has had to stage a few recalls in recent years, which have cost

  • them. Quality issues led to a quarterly loss in 2018 the company's first since

  • 2010. Our production engineers and our vendors and the suppliers have worked really hard

  • to get us back to the old level of quality that we used to have.

  • So I'm confident going forward that you're not going to see the same level of quality issues that we

  • had back in 2016 or 2017 model year vehicles.

  • Remember, we were, you know, some of those years we were growing twenty one twenty six percent a

  • year. As it confronts quality issues, Subaru still has to consider whether it is worth adding production,

  • which could be costly and backfire if demand slips.

  • Along similar lines, Subaru has moved very far upscale from its humble roots

  • with in some cases price tags that could work against it in the event that customers find themselves with

  • less to spend. One of the challenges they may have, though, is expanding into other parts of

  • the country. They have had some challenges expanding geographically to, for

  • instance, the Southeast.

  • Finally, the brand has to do what just about everyone else is doing.

  • Prepare for a shift toward electric vehicles.

  • Subaru has little in the way of its own electric vehicle technology.

  • However, the manufacturer does have a partnership with Toyota.

  • The two companies already collaborate.

  • In a market that is more or less constantly changing and riddled with uncertainty, Subaru has a strong

  • brand, a loyal following, unique products, and perhaps most important of all, a history of

  • listening to its customers.

Subaru might be one of the strangest success stories in the history of the American