Subaru will hire 900, expand Indiana plant

LAFAYETTE, Ind. -- Subaru's manufacturing plant in Lafayette, Ind., will undergo a $400 million expansion and add 900 full-time jobs, Subaru of Indiana Automotive Inc. executives and Indiana Gov. Mike Pence announced Wednesday.

The expansion will allow for production of the Subaru Impreza, and perhaps similar models, starting in 2016.

The plant currently employs about 3,600 and builds the popular Legacy and Outback cars along with the Tribeca SUV. It also builds the Camry midsize car under contract with Toyota Motor Corp., which has a 16.5% shareholder stake in Subaru.

The production expansion was planned in order to meet existing and anticipated demand for Subarus in the North American market. Subaru's U.S. sales have doubled in the past five years.

"Subaru has experienced tremendous success in the North American market over the last four years," said Tom Easterday, executive vice president of Subaru of Indiana Automotive. "That momentum is continuing."

Subaru, a subsidiary of Fuji Heavy Industries, said it will boost capacity at one of two assembly lines at the plant — the one that now is being used to build the Camry — from 100,000 vehicles to 200,000 vehicles.

Production of the Impreza will increase the unit's annual Subaru production to more than 300,000 vehicles per year. Combined with the Camry, total Subaru of Indiana Automotive production will rise to 400,000 vehicles per year.

Production of the Impreza is expected to start by the end of 2016. The Impreza WRX or XV Crosstrek also could be made at the plant since they are built using the Impreza platform, but that decision has not been made yet, Easterday said, and will be based on market demand.

Pence said the impact of the expansion speaks to the state's business-friendly climate, and will ripple across Indiana. The state offered Subaru of Indiana Automotive up to $9.5 million in performance-based tax credits and $500,000 in training grants. The city of Lafayette will consider supplemental property tax abatement for the company.

"Six months and a couple of days ago I was hired by the people of Indiana to do a job," Pence said. "I said we would make job creation job No. 1. And today, with this announcement of more than $400 million invested in this community and 900 new jobs, it proves again that Indiana's economy is on the move, and companies like Subaru are the reason why."

Demand driven

Demand for the Subaru brand is on the upswing but supply at dealers is low.

Subaru sold 724,500 vehicles globally for the fiscal year ended March, up 13% from the previous year, with 357,600 of them in the U.S. It sold 163,100 vehicles in Japan.

U.S. sales of the Impreza, now built in Gunma, Japan, have fallen 31% this year, largely because of a shortage of vehicles on dealer lots. Ward's Automotive says Subaru has enough Imprezas on the ground to supply dealers for only 29 days. A 60-day supply is considered optimal.

For the fiscal year ended March 31, Subaru sold 108,000 Impreza cars in the U.S., all imported from Japan.

"The North American market is very important," Easterday said. "In fact, it is the most important market for Subaru. An important part of future sales growth in North America is the expansion of production capacity."

The Impreza announcement comes amid an expansion already underway. The Subaru of Indiana Automotive plant is putting the finishing touches on a $75 million expansion that will allow for increased production during regular shifts in an effort to reduce overtime costs.

The expansion related to the Impreza will begin this fall and is expected to be finished by the end of 2016, executives said. However, there is at least one regulatory hurdle the company must clear for that to happen.

The planned increase in production to 400,000 vehicles a year would push the plant well over the 310,000-vehicle limit established in its state air permit.

Subaru spokeswoman Jennifer McGarvey confirmed SIA will be seeking another modification.

"With the planned expansion, we will be applying for a modification to the air permit," she said.

"However, we don't have any details about this at such an early date." The process of modifying an air permit can take months and includes time for the public to comment on any plans to increase air emissions.

'Staggering' news

Lafayette Mayor Tony Roswarski called the news of the investment "staggering." He said the expansion wouldn't have been possible without the strong relationship among Fuji Heavy Industry, Subaru of Indiana Automotive and local leaders.

"There can be no doubt that the impact of that investment will be felt well beyond the walls of this facility. They'll be felt in tangible and meaningful ways," said Roswarski. The investment "also represents a relationship, a deep and meaningful relationship, one that is based on trust and mutual respect between Fuji Heavy Industries, SIA, our local community, the state of Indiana and with all of the associates that work there."

Easterday said the announcement was meaningful for the entire manufacturing region and that it will be a boon for SIA's local supplier base.

"Clearly, this is a great project for our associates here at SIA and for the Greater Lafayette community, but this is also a significant economic development project for other cities and towns across the state of Indiana, as our extensive Subaru supplier base will definitely grow with the growth of SIA," Easterday said.