Subaru of Indiana manufactures the Tribeca, Outback, and Legacy, as well as the Toyota Camry for the North American market. In 2016 it will produce the Subaru Impreza, as well. David Soyka reports on how this automaker thrived when the industry as a whole was in a tailspin.
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Seventeen million new vehicles were sold in North America between 2000 and 2006. In 2009, production dipped to10.4 million, the economy entered a recession and the government bailed out GM and Chrysler.
Meanwhile, in the fall of 2009 Subaru of Indiana Automotive (SIA) celebrated the manufacture of its three millionth vehicle (a silver 2010 Subaru Outback). While other US automakers confronted their darkest hours, SIA grew. In May 2012 it embarked on a $75 million expansion project to increase capacity from 156,000 units to 180,000 units with no overtime to produce the Subaru Legacy, Tribeca, and Outback models. SIA Associates also build about 100,000 Toyota Camrys per year. For the fiscal year ending March 31, 2013, SIA built a record 271, 583 vehicles and has just announced an additional $400 million expansion to its Lafayette, Ind., facility in order to make an additional model, the Impreza, beginning in 2016. This latest expansion adds over half a million square feet and new equipment primarily in the paint and body assembly sections.
SIA currently employs 3,600; with the new production line, it plans to hire 900 additional workers. Given that SIA only makes some stamped steel and plastic injection molded parts in-house, the expansion is expected to promote even further job growth amongst its suppliers spread throughout Indiana, Ohio, Kentucky, and Michigan. As executive vice president Tom Easterday points out, “I think the multiplier is that for each new worker we add, 10 more jobs are created; with many of them at our suppliers.”
So how does Easterday account for SIA’s growth not only during a recession, but a recession that was particularly hard for the domestic auto industry?
“We were fortunate in that just as the recession started, Subaru introduced new Outback and Legacy models designed especially for the North American market, with more headroom and leg room, more cup holders and the latest electronics, all built on a world-class platform with a reputation for safety, quality, reliability, and performance. At around the time we starting building the new Outback and Legacy, the average age of a vehicle in America was over 10 years and a large portion of these owners were in the market for a new vehicle. Now, think of the difference in cars from 10 years ago compared to today in terms of comfort, fuel economy, convenience, and performance. So for us there was a unique opportunity in the market with incentive to get the latest features in a new vehicle as opposed to a used one, and from an automaker that was already known for safety, reliability and technological innovation.”
Equally important is a manufacturer that consistently delivers a quality product. “Our parent is a Japanese company, so you’d expect that we are constantly in a continuous improvement cycle through quality audits, lean manufacturing, and various kaizen practices. Another reason for our success during the recession is we had all these processes in place when other companies were just starting to implement them.”
Easterday also notes, “We have a very good group of associates with a spirit of teamwork committed to achieving and exceeding the highest expectations, which helped SIA become the first US automaker to achieve ISO 9001 Quality Management Certification. We also work closely with our suppliers to implement best practices. Our suppliers are an important part of our successful team effort.”
He adds, “That’s not anything necessarily unique to us, but one area where we in particular stand out is our safety record. In 2011, our accident frequency was only 1.54 per 100 full-time workers, as compared to a national average of 6.7 as reported by OSHA. It goes without saying you want your employees to be as safe as possible. But there’s also a business benefit to safety. The safer your work environment, the lower your operating costs because you aren’t paying medical expenses and other related costs. Moreover, productivity remains high; associates can better concentrate on their jobs when they feel safe and accidents aren’t disrupting work flows.”
Sustainable Cost Savings
Similarly, SIA’s commitment to sustainability – it was the first US car manufacturer to achieve both ISO 14001 Environmental Management Certification and ISO 50001 Certification for its energy management systems – has a bottom-line payoff. “We reduce, reuse and recycle just about all of our waste to the point where we avoid sending any waste whatsoever to a landfill,” Easterday notes. “One example of how we’ve reduced waste is how we now test welds. The past practice was to have a test car that you would then literally tear apart so you could physically examine how the welds held up. Today, we use ultrasound testing to assess weld performance. That’s not only more efficient, it eliminates a lot of wasted scrap metal.”
He continues, “Over the years, we’ve been awarded various ‘green’ awards in recognition of our environmental best practices and zero landfill status, regulatory compliance, and carbon footprint reduction. We’re also the only North American automaker to have its entire site designated by the National Wildlife Federation as a Backyard Wildlife Habitat site. Our commitment to the environment is first because as a corporation we recognize our responsibility to be effective environmental stewards, for the good of our community and future generations. At the same time, it makes sense purely from a business perspective – we estimate about – $1 to $2 million in profits that – annually that result directly from our environmental initiatives.”
Road to Recovery
Easterday sees brighter days ahead not only for SIA, but North American auto manufacturing as a whole. “The industry is definitely rebounding. Last year, 14.4 million new vehicles were sold in the US and current projections estimate between 15 to 15.3 million this year. There’s some pent up demand from many consumers who may have wanted a new car, but put off purchasing because of the recession. Now that the economy is improving, we expect to see increased interest in buying a new vehicle.”
What are these consumers looking for in a new car? “Affordability, reliability, safety and fuel economy,” Easterday says. “That’s why Subaru is a strong competitor in the North American market and will continue to be. And it goes without saying how popular the Toyota Camry has been in the U.S. market over the past several years. The strong consumer demand for the high-quality vehicles built by SIA Associates is driving our tremendous growth at SIA.”