Subaru Predicts Higher Margins, Lower Incentives in 2004

NEW YORK – In addition to a 7% hike in volume, Subaru of America Inc. expects to see better margins in 2004, says Chairman and CEO Takao Saito.

The executive predicts the introduction of the new Legacy here will help the importer reduce incentives from an average of $1,300 per unit last year to about $500 per vehicle in 2004.

Some of that gain may be offset by what parent company Fuji Heavy Industries Ltd. views as a too-strong yen, which is eroding margins on vehicles built in Japan. Currently, about half the Subarus sold in the U.S. are imported from Japan.

Legacy sales seen growing to 9,000 units per month.

Overall, SOA expects sales to rise to 200,000 units this year, up from the 187,000 vehicles sold last year. (See related story: Subaru Targets Sales of 35,000 for New CUV)

Saito says Subaru dealers are noticing more floor traffic from customers shopping for fuel-efficient cars that the brand has in abundance, due to gas prices that are on the rise in the U.S.
But part of the expected sales increase also will come from the Legacy. Saito forecasts Legacy deliveries will climb more than 10% to 8,000 units per month, up from about 7,000 monthly last year. He says Legacy sales eventually should pace at 9,000 units per month.

Saito expresses confidence that Saab Automobile's introduction of the 9-2X later this year will not hurt his brand, even though the Swedish car is based on the Impreza WRX. He notes that Saab will offer only a hatchback version of the car, while Subaru dealers sell two other Impreza models.

Still, some Subaru dealers have expressed dissatisfaction with the situation. "But our dealers understand that in total the (General Motors Corp.) alliance helps us," Saito says.