NEW YORK — Under the direction of President Tom Doll, Subaru of America has set U.S. sales records for eight consecutive years with no end in sight. The brand's lineup is centered around all-wheel-drive crossovers led by the Outback and Forester. The upcoming Ascent figures to take Subaru even higher as consumer interest in the brand remains strong. Some growing pains are evident, however, mainly in terms of service capacity.
Doll, 64, spoke with Staff Reporter Jack Walsworth and News Editor Lindsay Chappell in April during the New York auto show.
Q: What is Subaru's outlook for the rest of 2017? More records?
A: We certainly think we're going to have our ninth consecutive year of record sales and 10 consecutive years of sales increases. We're pretty confident about that. The market has changed, though. It's much more competitive this year than in prior years.
It's tough. For everybody. People are using large incentives and sometimes you say to yourself, "Boy, is it sustainable, what they're doing — longer term? Are they hindering their brand development?" We try to stay away from that. We can't go there. We don't have the resources. We'd rather put the resources in the beautiful products that you see.
As Subaru grows in volume, how is the company changing itself? Has Subaru added field personnel?
We've added a lot of people — over the past four to five years in particular. Forty percent of the people at Subaru of America today were not here five years ago. There are people at Subaru of America, administrative staff and so forth, who have never seen a cycle. They've only seen this upward movement.
You have to make sure that people get the appropriate training and development, because it's not always going to be like this. This is a tough industry. It's very competitive, and people out there would love to eat our lunch on a daily basis. It's important for our people to understand that it's not always going to be this way. You have to learn when times are good, like they are now, so that when times are bad you can think back to when it was good, and ask, "What were we doing? What were the attitudes we were trying to create? What were we trying to do with our retailers?"
That's not a message that a president typically has to tell people — that sooner or later, something bad's going to happen.
But it's natural. It's a cyclical business. We're on a great run, nine years of records and 10 years of sales increases, but I don't know what could happen. We could have some crazy war break out or gasoline prices go crazy, and next thing you know, we have to slug it out even more. We hope that doesn't happen, but it could and we have to be prepared for it. We've been around for a long time to help train these folks and say "Here's what's going to happen, and here's how you work with the retailers."
You try to position our retailers versus other brands they're selling because they have a choice. Retailers have a choice to sell. We want them selling our products.
When do you think you'll run out of production capacity in Indiana?
We're not worried about hitting the wall on capacity for at least three to five years. We have enough capacity at SIA or in Japan for us to be able to hit our midterm sales targets. Subaru of Indiana Automotive has a total capacity of 394,000 vehicles a year, and it can be expanded. They would have to get additional EPA or air permit rights in order to be able to do that, but they can do that.
But if you can see that coming in three to five years, is it already time to start figuring out your next factory?
That's right. They're thinking about that now based on how we're doing in the market. But we want to be careful and judicious about how we add capacity. We've learned. We were on the front page of Automotive News in 1991 or 1992, with a photo with all these cars parked everywhere. We don't ever want to go back to that type of situation where we had such an excess supply of vehicles and forced us to do a lot of stupid things.
What's the biggest issue facing Subaru dealerships right now?
The biggest issue to me, to be frank with you, is the service capacity. We just don't have enough service capacity. With all the vehicles that we've sold over the last five to seven years, the retailers need to invest their profits in expansion. That's why we've come up with programs like our FOX program — Fixed Operations Expansion program — to help the retailers expand and invest.
I always say that all profit is temporary. If you're not investing the bulk of that profit back into the business, at some point you're going to fall further and further behind. It's an obligation, not just on us to continually reinvest our profits and Fuji's profits into new technologies, but on the retailers, too. You've got to remember that less than 10 years ago, this was a franchise that was struggling to sell 180,000 or 190,000 cars a year. Now we're selling over 600,000 vehicles and on our way this year, hopefully, to 670,000 vehicles. So those retailers are not scaled in size correctly.
That's probably the biggest headache we have to solve as we continue to grow in our midrange period. Our ability to grow further is going to be limited by the ability to service the cars that we have. We've got to be able to service these folks that we've attracted to the brand and make sure they got a good experience so that they'll buy us again and keep our loyalty high.
How many of your dealers are participating in the FOX program?
It's over 400. It's exceeded our expectations.
But we have retailers in some of the metros who are operating on double shifts. They work weekends but they still can't keep up with the demand because that's how many cars we sold. And they need a bigger footprint. If they've maxed out adding shifts or adding additional technicians and service advisers or expanding their hours, now they have to actually build out.
If you ever go to some of our locations in the Pacific Northwest or Southern California, we're in great spots. The issue is only that they're too small. Given the size that we're selling, we need them to expand their footprints a little bit.
How do dealers feel about the upcoming Ascent?
They're beyond excited. This helps us in a lot of different areas. It helps us with legitimizing us in that three-row segment. And it's a beautiful execution.
Will Subaru look for a whole new customer with the Ascent, or will existing Subaru customers go up in size?
I see both. You'll see people who might want something with a little more utility than the Outback who aren't currently in our pool. And you'll see families. It's a segment where we haven't really been able to conquest much because we haven't had a vehicle that is competitive. This is a really great execution that allows us into a new segment. We have a lot of people who buy our cars at younger ages. We've got a lot of millennial people. And then we have a lot of older people. But the problem is that in their family formation years, they leave us. Why? They have to. We don't have a vehicle for them. Well, now we do and they can stay with us.
But also, one of the things that hurt our growth in the past was that customers had nowhere to go as they were forming their families, so they had to leave us. Now we've got to try and get them back.
What did Subaru learn from the Tribeca that was applied to the Ascent?
The Tribeca really wasn't a seven-seat type vehicle. It was underpowered when it came in. It only had a three-liter engine. And the styling didn't work for us. You can tell looking at the Ascent that it's a Subaru — not just from the star cluster on the front, but by all of the other elements that are part of it. It looks similar to Outback, looks similar to Forester and looks similar to Crosstrek. It's got the family resemblance, in a good way.
How has the Impreza launch gone?
It's doing well. We're right in the middle of the launch now. So we're spending a lot of money to advertise and market, but it's doing well.
Does Subaru expect a similar outcome with the Crosstrek?
I think that Crosstrek is going to be spectacular.
Will the Outback and Forester continue to lead the way? In that order?
They kind of go back and forth, depending on which one gets launched at what time. If you go back a couple years when the Forester was new, it outsold the Outback, but now the Outback is outselling Forester, or they're neck and neck. They're both doing very well. We're pleased with both of them doing the numbers we thought they would do considering where they are in their life cycles. They're doing well.
The Outback and Legacy are being significantly freshened. Why?
It's very important. The refresh gives the vehicle a different look, whether it's a new front fascia or the rear or the wheels and the tires. That's what we try to tell Subaru Corp. — just try to do something a little different. You know when you put a new set of tires and wheels on the car, it makes the thing look completely different.