Subaru’s plant in Lafayette, Indiana will soon find itself with extra capacity. The Indiana plant has been building Camry models for Toyota (Subaru’s largest shareholder) since 2007, along with Subaru’s Legacy, Outback and Tribeca models. However, the Louisville Journal and Courier now reports that Toyota has decided not to renew the contract. Subaru of Indiana Automotive (SIA) Executive Vice President Tom Easterday explained that the development was unexpected and due to “changes in Toyota’s production plans.”
The current Camry contract expires in late 2016. Toyota also makes the model at its own plant in Georgetown, Kentucky.
About one-third of the Indiana plant’s capacity is devoted to Camry production, so the loss of the model will free up considerable capacity for something else. Although Easterday has described the loss of the Camry as unexpected, he doesn’t expect any job cuts to result. However, the announcement in May that 900 new jobs were slated for Indiana could take longer to fulfil. These jobs were announced as part of plans to begin production of the Impreza by late 2016. With the Camry poised to leave at that time, the Impreza launch will not require so many new hires. However, Easterday emphasised that it will “more than offset” any losses from the Camry.
He also indicated future projects in the pipeline for Indiana, which could add several hundred jobs by 2018.
New possibilities
While Subaru was glad to have the Camry contract, its loss clearly opens up new opportunities for the facility and the company’s overall strategy for North America. The US is Subaru’s most important market and could account for 60% of the company’s global sales within the decade.
Demand has been strong. In the first six months this year Subaru’s US sales jumped 24.5% to set a new record at 204,597 units. The OEM was originally aiming for US sales of at least 350,000 unit this year, rising to 380,000 by the fiscal year ending March 2016. However, considering the recent sales performance, Takeshi Tachimori, President and Chief Executive of Subaru of America, has said that this year’s target could be revised to 400,000 units.
The Lafayette plant is Subaru’s only production facility in North America. In fiscal year 2013 it rolled out a record 271,583 vehicles. The plant currently builds around half of all Subaru vehicles sold in the region, with the remainder imported from Japan. However, the value of the yen continues to dampen competitiveness of Japanese-built models sold overseas.
With this in mind, Indiana could emerge as an attractive candidate for the new seven-seater Tribeca replacement. Fuji Heavy Industries President Yasuyuki Yoshinaga has just announced plans for the new model, which is expected in about two years.
The Tribeca is currently built at the Indiana facility, but production will be ended in January. Its replacement would slot in quite naturally. So far, there has been no confirmation of where the new model will be made.
Megan Lampinen
