Suzuki, Subaru pulls WRC plug and the problem with Subaru.

The motorsports community is facing more woes steeming from the credit crunch crisis. Earlier, Toyota F1 announced that it will be drastically cutting down its F1 budget, to the extent of foregoing a conventional glitzy launch for the 2009 F1 season for a far lower cost "online Internet launch." Then Honda dropped the bomb shell that it will be pulling out of F1. Mercedes later announced that it aims to cut F1 cost by at least 50% over the next two years.

The effect has now trickled down from the realm of open-wheel racing to closed wheel racing series. The World Rally Championship WRC series is the latest victim with both Suzuki and Subaru announcing that their withdrawal from the WRC series on the same day.

Below is an excerpt from their respective company's press release.

Image and press release from worldcarfans.com

In responding to the contraction of the automotive sales caused by recent global economic turmoil, Suzuki has been promptly taking possible countermeasures including the reassessment of its global production output. The company, however, foresees the shrinking trend in longer periods of time rather than a short-term phenomenon. To secure its own business environment for tomorrow, the organization reviews every aspect of the operations and decided to focus on the core business functions such as the manufacturing system, environment technologies, and development of new-generation powertrains. As a result, Suzuki concluded to suspend the WRC activities from 2009. - Suzuki Motor Corp.

FHI (Fuji Heavy Industries, parent company of Subaru Motors) considers it has achieved its original target in WRC participation. However, while considering positioning the WRC activity in Subaru branding strategy towards the future, our business environment has been dramatically changed due to the quick deterioration of the global economy. In order to optimize the management resources and to strengthen further the Subaru brand, FHI decided to withdraw from WRC activities at the earliest timing. - Fuji Heavy Industries Ltd.

Both Suzuki and Subaru have been long time participants of the world rallying with Suzuki being synonymous with drivers Nobuhiro "Monster" Tajima and Subaru with both the late Colin McRae and Richard Burns.

Both Suzuki and Subaru has work cut out for them, but among the two Suzuki is in a clearly better shape. Suzuki, in partnership with Indian car maker Maruti is the top selling foreign car brand in India, and is also among the best selling motorcycle brand is the fast rising BRIC (Brazil, Russia, India, China) markets. Suzuki's motorcycle business gives it a unique edge against other car makers (except Honda) as first time car buyers in developing markets and upgraders from motorcycles are already familiar with the brand. Over the next decade, many industry analysts expect car sales in BRIC regions to account close to 50% of global new car sales as demand in developed markets stagnate, due to a combination of saturated market and slowing population growth. In the kei car segment in Japan, Suzuki is the segment leader, and kei cars are the largest market segment in Japan. In terms of overall sales in Japan, Suzuki trails behind the far larger Honda by only a whisker. Suzuki will hit some bumps along the way but they will come out fine minus some scratches.


Image from Nihoncar.com

I have long wanted to write something about Subaru's disconnected brand image and direction of its new product development against the current automotive trend, but was not able to due to other commitments.

In short, Subaru have always prided itself with its superior mechanical prowess - from their boxer engine configuration and all-wheel-drive powertrain setup. Its heavy involvement in WRC have propelled the brand into every wanabe racer boy and adolescent's poster car. But racer boys and pin-up poster cars don't sustain a car company. After all, Toyota became the largest and most powerful car maker by building incredibly boring cars, but those are cars that meet probably 95% of car buyer market's requirement.

Subaru's management realised they have a problem moving forward into the next 20 years. It needs to draw in more customers, current owners of other car brands. To do so it needs to widen Subaru's appeal, not just to rally fans crowd. So they tried to make the iconic Impreza more mainstream, less racer boy, more Ford Focus or Golf GTi. The results weren't pretty and the new "softened Impreza" alienated many of Subaru's core customer base - the English blokes at the pub always looking for a fight, the techno-song blasting and more blue lights than a Boeing jet Chinese Ah Beng in metro cities of Hong Kong or Singapore, the ricer boys with baseball caps in America and Australia.

Image from nihoncar.com

Subaru has two problem - its brand is too synonymous with a very niche appeal (performance and rally pedigree) and very little else, and secondly a flip-flopped decision making structure which is unable to make a correct decision and follow through it.

On their niche appeal, Subaru kept banging on its strength in AWD and boxer engines that it completely ignored the need for product line-up expansion, platform sharing / consolidation and alternative energy powertrain. These should be the 3 key focus for the future growth of any car company. But Subaru completely ignored all that, and basked in their glory of AWD and world rally success. AWD is good for handling but it is poor on fuel economy due to additional weight and mechanical friction. In an era of advance chassis control electronics, some 90% of AWD traction function can now be replicated by ESP (electronic stability programme). The EU government is hard clamping down vehicular CO2 emission and USA has mandated minimum average fleet wide fuel economy. How relevant is fuel thirsty AWD and boxer engines in the current automotive trend? More importantly, how relevant is Subaru?

You may say that Subaru's very reason of success is also their reason of failure to innovate into the future. If Subaru never wanted to appeal to the mainstream buyer then it should not be in the car business in the first place. Even brands like Maserati and Ferrari is thinking about expanding sales. Being niche is just a catch phrase, the fact is that car industry is a volume game. Fiat Group CEO Sergio Marchionne suggested that car makers need to sell between 5 to 6 million cars annually to stay in business. Why else did you think would Porsche want to buy VW? After all, they did build an SUV and now a sedan to bring in the money for the 911 right?

On their decision making, look at the evolution of the Impreza, from the iconic early MY95 models to the later bug-eyed MY03 and then "airplane inspired" flying wings MY05 models. Where is the design direction man? Same goes to the Tribeca SUV. First they wanted to make it controversial and attention grabbing, then they reverted to a conventional styling. Make up your mind Subaru! Such kind of flip-flop direction only confuses potential customers.

The controversial launch model B9 Tribeca. Its airplane inspired front is supposed to be Subaru's new corporate identity, harking back to Subaru's history in making airplanes. It was quickly abandoned by the next model update.

Facelifted Tribeca with a more conventional front.
Images from Subaru of America.

Subaru should have learn from marketers at BMW, Mercedes and even Volkswagen in brand management. All of them have a high performance "halo car"; cars to lift the brand image appeal but fits in nicely to the rest of the mainstream models. BMW's M series, Mercedes AMG models and Volkswagen's iconic GTi and R series. These brands never lost their mainstream appeal. Subaru marketers should instead create a sub-brand for its high performance models and use them for branding appeal. The way BMW, Mercedes, Audi and even Volkswagen uses their M, AMG, S-line and RS, GTi and R series. That way the image and positioning of the primary brand is not blurred but yet has a wide appeal to the public. Mercedes-Benz's luxury image is not blurred by its hard riding torque monster AMG and AMG Black series cars. Even arch rival Mitsubishi is doing a slightly better job at marketing their Lancers. Subaru cars carries an assorted brand names - STi, WRX and Prodrive. What do you expect average Joe public to make out of these? When a customer is confused he doesn't bother to keep the car in his consideration list anymore, he moves on to a model he is more familiar with. All this is decided before he even steps into a sales showroom.

Now that Subaru has dropped its WRC baggage, this is an opportunity for Subaru to remake itself. I would start off with the mainstream Legacy sedan. I would suggest to make this into a Ford Mondeo challenger. The Legacy makes a lot more sense for mainstream appeal than the redesigned Impreza, it would be an ideal car to represent the new Subaru brand. The Legacy is less deeply fixated into one area of appeal, making it easier to take it on a different future design path. Personally I think Subaru should have worked on this car instead of the extreme rally bred Impreza. Demand for large SUVs are waning and the once popular wagons have yet to pick up the slack from slowing SUV sales (customers prefer smaller urban SUVs). So Tribeca and Foresters are out. And stop those rally inspired ads. Do a market survey and gauge for yourself what the average public thinks about rallying and if they find it appealing at all. Keep banging on mud splattered Imprezas and you are stuck with the same small group of buyers forever.

The Subaru Legacy.

About 15 years ago Mazda was in a situation not too different from Subaru. It was known for its rotary engine RX-7 and Miata MX-5 sports cars and little else. Today Mazda 3 is the third best selling passenger car and best selling privately purchased car in Australia. Instead of putting money in fancy AWD mechanicals and playing around with mud and snow in rally stages, put money instead on design. Price, brand and design are always the 3 most important factors determining a vehicle's purchase in any car market, irrespective of local taste and culture. This was the strategy Mazda used, to be mainstream and yet diffentiate itself from giants of Toyota and Honda. Mazda knows it would get slaughtered if it were to take these 2 giants head one. Mazda hired the best designers they could get and invested heavily into ground breaking design concepts that embraced its Japanese heritage rather than trying too hard to emulate European designs, like many Asian / American car companies are doing. The Subaru brand and engineering talents have a lot of untapped potential. Mechanically nothing is really wrong with their cars. They just need better leaders. That's all.