Subaru To Exit Engine And Power Products Business
By pdamon26 May 2016
A rising tide usually lifts all boats. But in at least one case, the growth of one segment of Fuji Heavy Industries Ltd.’s (FHI) business is leading to the end of another.
Citing the expansion of its Subaru automotive business, FHI announced several moves, the most significant of which is that it will exit its small industrial engine and power products business globally. In North America, that means the end of the Subaru Industrial Power Products business operated by Robin America, Lake Zurich, Ill.
The company has informed customers in Europe that Subaru’s industrial products company will be merged with the Subaru automobile business. The move is part of a larger FHI reorganization that includes a renaming of Fuji Heavy Industries to Subaru Corp. and a greater focus on the company’s core automotive business.
In its letter to customers, FHI said that “to make best use of human resources of (current) industrial products business for automobile business growth, FHI decided to suspend all new development projects of the industrial business effective immediately. This includes not only newly received inquiries but currently on-going projects as well.”
The company said that for the time being, it will continue production, supply and servicing of existing models. In North America, Subaru sells single and V-twin gasoline engines from 2.8 to 36 hp; portable generators from 2.5 to 13 kW; engine driven pumps from 28 to 499 gpm; and parts and service support for the engines and power products.
The exact end date of production has not been finalized, but the letter stated that “FHI will start making plans with the intent to cease production of these existing products at the end of September 2017.”
In its letter explaining its move to customers, FHI said, “FHI’s Industrial Products Company has conducted international business in over 90 countries and globally, this business ranks 4th in the industry. However, the industry has become a dog-eat-dog business. Low-cost country production with lower priced and lower quality products are accepted by customers as the market standard. FHI, too, has made efforts to lower its product’s cost without sacrificing quality, such as by adding production capacity in China and so on. Despite such efforts, it is very hard to foresee our business growth in the industrial products business.
“Now, the entire company is working on its new mid-term business plan “Prominence 2020” setting our business goal on 2020. FHI’s direction is to further strengthen its automobile business which, as a core business, can provide continuous growth. To achieve it, one key aspect is to meet environmental regulations in various important markets such as USA. To make this happen, FHI will require more efficiency and flexibility with its limited management resources. For these reasons, at FHI’s extraordinary meeting of Board of Directors held on May 12, the Board approved a proposal to merge the Industrial Products Company into the Subaru automobile business.”
Subaru Industrial Power Products eventually issued its own press release in which it confirmed that FHI’s “operational change” would focus all engineering and financial resources on the quickly growing automobile business.”
“It was a corporate decision, it was not an Industrial Products decision,” said David Frank, vice president of Sales and Marketing for Subaru Industrial Products in Illinois. “The automotive business did more than $28 billion, we do less than $500 million. So it was seen as a small portion of the business and they needed those resources and those engineers.
“So it wasn’t that one division did anything bad, it’s just one division is doing too well and they needed those people.”
The move came just over a year after Subaru Industrial Products changed the look and styling of its products to more closely identify with the company’s car division.
The company had also been active in developing and expanding its business over the last two years. This included the establishment of a dealer loyalty program, the launch of a line of small mechanical axles and adding new gear reduction options to its overhead cam engines in an effort to broaden their market applicability.
Along with that, the company had earned significant product placements in high profile venues such as Lowe’s, Home Depot and Costco.
“We were working on all kinds of projects,” Frank said. “GIE was going to be a game-changer for us. It was really exciting and I can tell you that in our office, we had the feeling that we were very close. Then boom.”
But Frank emphasized the company is committed to supporting current customers with products and support, even as it planned its departure from the market.
“How we exit business is defining us as a company,” he said. “So we will be working closely with our distributors to offer the kind of support we’ve been known for to our customers.
“We will make sure that aftermarket service and support will stay in place and Subaru understands we have an obligation to our five-year warranty and that we will stand behind that as Subaru. We aren’t going to walk away from our obligations.”