SUBARU: long-term performance & turning pointsSales (revenue) and profit-margin ratio
Sales (¥ bn)Net margin (%)
1917From Nakajima Aircraft to Fuji Heavy Industries, and into the small car
Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
FY1957 · unconsolidated
Revenue$24M
Net income—
Net margin—
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FY1985 · unconsolidated
Revenue$2.8B
Net income$62M
Net margin2.2%
1917Nakajima Chikuhei founds an aeroplane research laboratory at Ota, Gunma
1931The business is reorganised as Nakajima Aircraft
1945Renamed Fuji Sangyo on GHQ order; converted from war work to civilian goods
1950The Enterprise Reconstruction Law breaks Fuji Sangyo into twelve companies
1953Five of the twelve reassemble as Fuji Heavy Industries
1955The five predecessor companies are absorbed by merger
1958The Subaru 360 light passenger car is launched
1960The Gunma works is opened in the former Nakajima Ota plant
1966The Subaru 1000 introduces the horizontally-opposed engine
1968A business tie-up with Nissan Motor is concluded
1969The Yajima plant at Gunma starts production
1972The Leone brings four-wheel drive to a production passenger car
1979The revised four-wheel-drive Leone goes on sale
1987Subaru of Indiana Automotive founded as a joint venture with Isuzu
1989The Legacy is launched; the Indiana plant begins production
SUBARU begins not with a car but with an aircraft maker, and with that maker being taken apart. Nakajima Aircraft built more airframes than any firm in Japan and more engines than all but Mitsubishi; the occupation stripped it of aviation and the 1950 reconstruction law split it into twelve companies. Five of those fragments came back together in 1953 as Fuji Heavy Industries — a company with no founder of its own, only the engineers and the plants a lost industry had left behind. What those engineers knew was how to make a structure light and strong, and they spent the next three decades aiming that at small cars: the Subaru 360 in 1958, the horizontally-opposed engine in 1966, and in 1972 the first four-wheel-drive passenger car anyone had put on sale.
The break-up of an aircraft maker, and the turn to cars
In May 1917, having left the Imperial Japanese Navy as a reserve lieutenant, Nakajima Chikuhei (中島知久平) founded a private aeroplane research laboratory in the town of Ota, Gunma prefecture. His premise was that the defence of a country as economically poor as ours ought to be built around aircraft, and that if we are to catch up with the state of aviation in the world we must raise up a private aircraft industry — so he began from a privately run laboratory rather than a state arsenal. In 1931 the business was reorganised as Nakajima Aircraft Works and its scale expanded, taking on the design and volume production of front-line types: the Army’s Type 97 fighter, the engine for the Navy’s Zero carrier fighter, and others. At its peak between 1941 and 1945 its share of Japanese aircraft production ran to 28 per cent of airframes (Mitsubishi second at 17.9 per cent) and 31.3 per cent of engines (Mitsubishi first at 35.6 per cent). Together with Mitsubishi Heavy Industries it accounted for the largest output in the country — the two of them quite literally divided the industry between them.
With the defeat of August 1945, an order from the General Headquarters of the Supreme Commander for the Allied Powers turned Nakajima Aircraft into Fuji Sangyo Co., Ltd., and the company was forced to convert its business under the severe constraint of an occupation policy that banned aircraft manufacture outright. Under the Enterprise Reconstruction and Reorganisation Law of 1950 Fuji Sangyo was broken into twelve companies, and what had been one of the largest aircraft makers in Japan was, as an organisation, dismantled. Five of those twelve — Fuji Kogyo, Fuji Jidosha Kogyo, Omiya Fuji Kogyo, Utsunomiya Sharyo and Tokyo Fuji Sangyo — jointly subscribed paid-in capital of $138,889 (¥50m) and reassembled themselves in July 1953 as Fuji Heavy Industries Co., Ltd.; in April 1955 the new company absorbed all five by merger and settled its scale at capital of $2.3M (¥831m). This is the point at which the body of engineers formed in the Nakajima Aircraft years regathered in the post-war motor industry. The reality of an occupation policy that dismantled an aircraft maker had, ironically, pushed the same people into becoming a car maker — and that ironic outcome defined the identity of the later SUBARU.
The Subaru 360 as a people’s car, and the boxer-AWD signature
In May 1958 Fuji Heavy Industries put the Subaru 360, a light passenger car, on the market. Momose Shinroku (百瀬晋六), an aircraft designer by training, led the work, developing a technical package advanced for its day: a monocoque body of the company’s own design and a rear-engine layout. At the same time the trade press was voicing its impatience with the passenger cars then available — cameras and shipbuilding have both reached world standard, and only the passenger car still cannot stand on its own feet, and the Datsun was a thing whose engine and chassis alike are a twenty-year-old antique body given a slight coat of whitewash (Diamond, 21 March 1955) — and demand for a genuine people’s car was rising. Known affectionately as the ladybird (てんとう虫), the Subaru 360 stayed in production for more than a decade, and by 1961 the company could report that in 1958 we entered light four-wheeled passenger cars and launched the Subaru 360. Sales of it have lately grown rapidly and are contributing to the improvement in our results (Keizai Tenbo, 1 March 1961). The Gunma works that carried this volume was itself an inheritance: in October 1960 the company took over the former Nakajima Aircraft Ota works, requisitioned after the war and used as a US Army camp, and refitted it. The production base of the aircraft years was reused, as it stood, as Subaru’s capacity for a growing model.
By the late 1960s excess capacity had become a serious problem across the motor industry, and in 1965 Diamond was reporting the mood for consolidation: in 1959 and 1960, when demand was forecast to surge, every company planned large expansions and put up new plants one after another, and then, which companies are the ones that will disappear? (Diamond, 26 April 1965). When in 1968 Fuji Heavy Industries examined and then withdrew from a tie-up with Nissan Motor, the same magazine observed that F is itself a maker that cannot possibly survive alone and that a merger of equals, one to one, has become a pipe dream (Diamond, 27 May 1968). Yet with the first-generation Subaru 1000 of 1966 the company adopted the combination of a horizontally-opposed engine and front-wheel drive, and in 1972 it put the first-generation Leone on sale — the first four-wheel-drive system offered on a production passenger car anywhere in the world. The proprietary package of boxer engine plus all-wheel drive was established, and in 1985 a joint venture with Isuzu Motors set up Subaru of Indiana Automotive in the United States, which began operating in 1989.
1990Three principal shareholders in twelve years, and independence reaffirmed
Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
FY1992 · consolidated
Revenue$8.2B
Net income-$171M
Net margin-2.1%
→
FY2005 · consolidated
Revenue$13.1B
Net income$165M
Net margin1.3%
1990The company falls into operating loss and begins a rebuild
1990The US distributor Subaru of America is acquired
1993One of the largest post-war operating losses to that date is posted
1995The Saitama works is opened
1996Kawai Isamu comes from Nissan as president
1999A capital tie-up with General Motors is concluded; GM takes 20 per cent
2003The company withdraws from rolling stock and bus bodies
2005The B9 Tribeca SUV is announced, opening the North American SUV business in earnest
2005GM sells its entire holding; the alliance is dissolved
For the whole of this period the company was somebody else’s shareholding, and for the whole of it the cars stayed its own. Revenue stood at $8.2B (¥1.04tn) in the year to March 1992 and reached $13.1B (¥1.45tn) by the year to March 2005, while the register above it changed hands three times — a president sent in from Nissan, twenty per cent of the equity held by General Motors, and then Toyota. What none of the three could move was the technical package underneath, and that is why a mid-sized maker that could not have survived a merger of equals survived three owners instead.
Restructuring under a president sent from Nissan, and independence kept
In the first half of the 1990s Fuji Heavy Industries took a double headwind — the maturing of the domestic passenger-car market and intensifying competition in North America — and its results deteriorated, posting in the year to March 1993 an operating loss that was among the largest in its post-war history at the time. Requests for support came at once from the Industrial Bank of Japan, its main bank, and from Nissan Motor, its largest shareholder, and in 1996 Nissan’s executive vice-president Kawai Isamu (川合勇) was sent in as president of Fuji Heavy Industries. Through the second half of the 1990s the restructuring was carried out under Nissan’s lead. It was a period in which management was confronted with a choice: hold to the independent maker’s own line, or go under the wing of one of the majors. What Diamond had foreseen in 1968 — that the company will end up rolling into Nissan Motor, of the same Industrial Bank group (Diamond, 27 May 1968) — had come true, in an altered form.
Under Kawai the company pushed forward in parallel with a reorganisation of the domestic sales network, selection and concentration in its overseas business, a deepening of the aerospace business and a rise in the motor business’s dependence on North America, and over the five years from 1997 it laid the base for a recovery in results. The aerospace business carried over from the Nakajima Aircraft years grew as well: supplying centre wing sections to Boeing and developing trainer aircraft for the Self-Defence Forces made it a source of earnings alongside cars, and it supported the independence of the business structure as a whole. A restructuring that had begun in the unusual form of a president seconded from Nissan came to be judged, in later years, as a realist’s decision — take in outside management knowledge while keeping the independence of an independent maker. Having thrown back the merger-of-equals argument of 1968 and held its own line by accepting people alone, the company laid the ground on which it would not lose its distinctiveness through the changes of ownership that followed.
Nissan to GM to Toyota: three changes of principal shareholder in twelve years
In October 1999, immediately after concluding its own capital tie-up with Renault, Nissan Motor decided to sell the shares it held in Fuji Heavy Industries, and in its place General Motors of the United States acquired 20 per cent of Fuji Heavy Industries’ issued shares to become the new principal shareholder. GM positioned Fuji Heavy Industries as one corner of the Asia-Pacific strategy it was then pursuing, and planned to share small-car platforms and to develop environmental technologies jointly. But with the deterioration of GM’s own North American business the collaboration did not proceed as planned, and in October 2005 GM sold its entire holding of Fuji Heavy Industries shares on the market. The capital relationship had been dissolved in a mere six years. The collaboration left a certain groundwork in the product planning of North American SUVs, but the shared small-car platform that was the object of the capital tie-up itself came to nothing.
In parallel with GM’s sale, Toyota Motor acquired 8.7 per cent of Fuji Heavy Industries’ issued shares to become a new major shareholder, and by 2008 had raised its holding to 16.5 per cent, taking the position of largest shareholder in substance. In the twelve years from the Nissan-seconded president of 1996, through GM’s withdrawal in 2005, to Toyota becoming largest shareholder in 2008, the company went through three changes of principal shareholder — Nissan, GM and Toyota. Even in the history of the Japanese motor industry this was an unusual sequence of ownership. Ironically, that very run of changes stands as proof, by contradiction, of SUBARU’s independence: in none of those periods did it bend its own line. The proprietary technical package built around the boxer engine and all-wheel drive worked as an asset that belonged to the company and that no owner could move.
2006Toyota, EyeSight, and one bet on the North American SUV
Revenue (¥ bn, bars) · net margin (%, line)
Source: securities reports
FY2006 · consolidated
Revenue$12.7B
Net income$134M
Net margin1.1%
→
FY2023 · consolidated
Revenue$26.9B
Net income$1.4B
Net margin5.3%
2006A business tie-up with Toyota Motor is concluded
2008Toyota raises its holding to 16.5 per cent
2008The EyeSight driver-assistance system is developed
2012The wind-power generation business is sold to Hitachi
2014The second generation of EyeSight reaches the market
2017The company is renamed SUBARU
2017The Subaru Global Platform debuts on the new Impreza
2017The company withdraws from general-purpose engines and generators
2019A capital and business alliance with Toyota Motor is agreed
2023Operating profit recovers to ¥267.5bn as the new Crosstrek and Forester land
From here the company stops hedging. With Toyota above it on the register and a stereo camera on the windscreen, it aimed almost everything at one segment in one country, and for four years running from the year to March 2015 it earned more than ¥300bn of operating profit a year on that bet. The name went with the strategy: in 2017 Fuji Heavy Industries became SUBARU, and what had been an aircraft maker with a car division finished the journey into a car maker with an aerospace division.
EyeSight, the car that does not crash, and 70 per cent dependence on North America
From 2008, with the collaboration with Toyota as its base, Fuji Heavy Industries pursued a strategy of concentration on the North American passenger-car market, launching a run of products centred on the SUV segment. In 2014 it brought out the second generation of EyeSight, its own driver-assistance system. Built around stereo-camera forward recognition, its autonomous emergency braking was early even by world standards at the time of launch, and the advertising line — the car that does not crash — took hold in the market. The company built a distinctive brand position in driver assistance, and technical superiority in safety performance became the weapon of a mid-sized independent maker in North America, forming a devoted customer base among middle-income families.
Through the 2010s the North American market sustained a boom in mid-size and D-segment SUVs, and the core products — Forester, Outback, Legacy and Impreza — all grew their unit sales in the United States. From the year to March 2015 through the year to March 2018 the company posted operating profit above $2.7B (¥300bn) every year, the peak of its results. Dependence on the North American market passed 70 per cent, and a business structure hardened in which the whole earnings profile turned on North American demand, through exports from Japan and local production in the United States alike. The management line of not chasing scale, but digging deep into a niche with its own strengths, was held to. Half a century after the founding of Fuji Heavy Industries in 1953, a management that kept the independent maker’s posture even while receiving Toyota as a principal shareholder held together coherently, because there was a clear field of battle in the North American SUV market.
The renaming to SUBARU, and a business model back in cycle
In April 2017, by resolution of the general meeting of shareholders, Fuji Heavy Industries changed its corporate name to SUBARU, unifying the company name long used since the war with SUBARU, the name of the car brand. Sixty-four years after the establishment of Fuji Heavy Industries in 1953, the renaming declared to the world inside and outside the company a policy of bringing the centre of gravity of management together with the motor business and the SUBARU brand, while maintaining the aerospace business. In 2017 the new Impreza introduced the Subaru Global Platform, a new-generation architecture rolled out to strengthen the products and improve driving performance. A century counting from Nakajima Aircraft, and sixty-four years from the founding of Fuji Heavy Industries, the unification of the name marked the point at which the shift of the business’s centre from aircraft to cars was complete. The aerospace company survives as one division of SUBARU, but at a level that leaves its share of revenue in the single digits.
Between 2019 and 2021 SUBARU took two headwinds — the spread of COVID-19 and production constraints from the chip shortage in the North American market — and its results dipped for a time. But the successive launches through 2022 and 2023 of the new Crosstrek strong hybrid and the new Forester put it back on a recovery path. Operating profit for the year to March 2023 recovered to $1.9B (¥268bn), and the virtuous circle of what the company calls its own business model — low inventory, low incentives, high residual values — was turning again. Deepening collaboration with Toyota carried forward in parallel the development of new battery electric vehicles and the joint rollout of next-generation driver assistance, and the base for growth over the coming decade was in place. The independent maker that had been cornered by the merger-of-equals argument in 1968 had, by the 2020s, settled in as a mid-sized company with a profitable constitution of its own.
The turning points, read in full: what was at stake, what was chosen and what the revenue did around it. The Japanese edition is the edition of record and carries the sourced dossier behind each decision — background, options weighed, outcome — linked under every decision.
Revenue (¥ bn) · net margin % · around FY1953
Key decision · 1953
The founding of SUBARU: Nakajima Aircraft dismantled, five successors reassembled as Fuji Heavy Industries (1953)
What a company reassembled as a group shows
What this founding shows is not the story of a single founder but the course by which a dismantled body of engineers gathered itself back into one company. Nakajima Aircraft lost its main business, aircraft, with the defeat, and was split as an organisation under the Law for the Elimination of Excessive Concentration of Economic Power. Even so, the trade between its plants and the ties among its engineers had survived from before the war, and that is what appears to have made the reassembly of the five companies practicable. The character of this reorganisation is visible in the fact that, with no particular founder, firms of the old Nakajima line obtained a single legal entity through the procedure of setting up a holding company and then merging.
The other thing that comes into view is the route by which technology cultivated in aircraft was turned towards civilian demand in peacetime. Just as Momose Shinroku and his colleagues applied the lightening of airframe structures to the Subaru 360, the aircraft technology that had been taken away was handed on to a new use in the passenger car. The demand of the age expressed in the people’s-car concept, and a body of engineers made one again by reassembly, overlapped — and that, one can read, is what turned Fuji Heavy Industries from an aircraft maker into a company whose main business was passenger cars. The vessel that held the technology surviving the post-war reorganisation is what became the foundation of the later SUBARU.
The Indiana joint venture with Isuzu, across keiretsu lines (1987)
What to secure first
The core of this decision lies in two mid-sized makers, both short on scale, pooling a plant in North America across the keiretsu boundaries that then defined the Japanese motor industry. It was a choice to clear a break-even line neither could reach alone by sharing it with Isuzu, a company belonging to a different group. Taking on a heavy fixed asset like a plant, and taking it on first, was also a large wager at a time when demand could not be read with confidence. In fact the losses at SIA were one of the triggers of the fall into operating loss in 1990 and of the rebuild that followed, and they coincided with the collapse of the Tajima regime.
Even so, the Indiana plant secured at that moment remained in Fuji Heavy Industries’ hands as a production base after the alliance was dissolved in 2002 and operation passed to the company alone. The decision to reach across keiretsu lines and take hold of the land and the factory first can be seen as having produced, at one and the same time, the short-term pain of losses and the long-term fruit of a footing from which it could go on building cars in North America. What a mid-sized maker short on scale should secure first, in order to survive — this decision can be read as the case that put that question early.
Kawai’s rebuild, and the return of the parent company to profit (1990)
Rather than chasing scale, where to put your strengths to work
What president Kawai Isamu faced in this rebuild was less the filling of a financial hole than the error of a mid-sized maker trying to earn from the same mass production as the majors. Compete on scale in a market held by Toyota and Nissan, and Fuji Heavy Industries — which could match neither their parts commonality nor their sales networks — takes a cost disadvantage on board. A manager who had come up through production, going round the test track, the plants and the dealers himself and rebuilding from the shop-floor numbers of inventory, quality and cost, shows a character different from the bank-led mass-production management of the time. The choice to earn by narrowing to what you are good at was handed on to the later North American SUV business.
That said, a rebuild sustained by the centripetal force of one leader also cast a shadow. Leadership so strong that an executive said I never imagined a single leader could change a company this much stood, turned the other way round, next to an atmosphere in which it was hard to differ with the top. The concealment of defective vehicles that Nikkei Business identified in 1997 as a corporate culture in which the primacy of the rebuild left people unable to speak, and the arrest of chairman Kawai the following year, show that the success of a rebuild can invite a different kind of failure. Rather than chasing scale, where to put your strengths to work — Kawai’s question left both its light and its shadow behind it.
Accepting a 20 per cent stake from General Motors while keeping its own agency (1999)
The technology handed over, and the independence it meant to keep
The core of this decision lies in choosing, not in distress but while trading well, an intermediate design — twenty per cent, agency retained — in the face of a worldwide restructuring of the industry. It was neither an outright acquisition nor a rescue: in exchange for handing over the technology of the horizontally-opposed engine and four-wheel drive, the company sought to keep its own brand and its own agency in management. Twenty per cent was a tightrope of a number, one that raised the flag of membership in the group while stopping short of control. The reading that the more the technology handed over lies in an area the other side lacks, the more independence can be preserved, is one answer for a mid-sized maker joining forces with a giant.
But what ended the tightrope act was not an achievement of Fuji Heavy Industries; it was circumstances on GM’s side. Listing in North America, GM let go of its holding in 2005 and the alliance came undone in six years. Your own independence turning on your partner’s stamina — that experience persisted, in the tie-up with Toyota that began immediately afterwards, as the same question of how far to join and how far to stay independent. In the sight of today’s Subaru joining deeply with Toyota on electrification while trying to keep its own colour, the same tension as the choice of 1999 runs on.
Concentrating on North America and moving into crossover SUVs in earnest (2005)
Management that bets on one market
Subaru’s concentration on North America was a choice close to a wager, the kind a mid-sized maker poor in resources makes to survive. Not the home market, not Europe, but one market — North America, where demand for SUVs and crossovers was large — and development, production and sales all gathered there. It was a decision to avoid fighting across the board and narrow down to the ground it could win on, and it took several years to settle, from the move to sole operation of SIA in 2003 to the launch of the Tribeca in 2005.
That single-point concentration carries a large fruit and, inseparable from it, a danger. When North America grows, earnings leap; but the whole company is exposed to one market, to currency movements and to any stall in local demand. The problems over final vehicle inspections in later years, and the lateness to electrification, are not unrelated to the slackness that success built on North America bred within. Even so, in deciding early where to gather limited resources, this choice has defined Subaru’s character down to the present day.
Accepting Toyota’s stake up to 16.5 per cent, and joining the group in substance (2008)
A shrewd Toyota, and the independence left behind
The core of this decision lies in moving inside a giant group while leaving as much independence intact as possible, and doing so at the stage of weak results rather than of failure. Toyota avoided equity-method treatment and avoided seconding directors, and left the Subaru brand standing. Not baring the logic of capital, but waiting until the time was ripe — the Toyota manner that took decades to make subsidiaries of Daihatsu and Hino Motors can be seen running through here as well. For a mid-sized maker it was a choice close to a tightrope: hold your footing just short of being controlled, and gain a backer.
That said, the boundary between independence and dependence is not fixed. In 2019 Toyota raised its holding to 20 per cent and made Subaru — Fuji Heavy Industries as was — an equity-method affiliate. The line drawn in 2008, that it would not take control, was quietly rewritten over a dozen-odd years. How far a mid-sized maker that has switched backers from GM to Toyota can keep its own colour, and from what point it becomes part of the group — between the collaboration symbolised by the BRZ and the 86, and a stake creeping upward, that question appears still to be left open.
This English edition follows the Japanese one chapter by chapter. The Japanese edition remains the edition of record: it carries the source-by-source citations, the financial tables and the shareholder and executive records. 日本語版（詳細）— SUBARU full history in Japanese →
SUBARU Corporation (株式会社SUBARU, formerly Fuji Heavy Industries) — 有価証券報告書 (annual securities reports), including the 沿革 corporate-history section, and company announcements on the 2017 renaming and the Toyota alliance.
Diamond — ダイヤモンド (Diamond, Inc.): 21 March 1955, Who will build the people’s car?; 26 April 1965, Cutting across the questions piling up in the motor industry; 27 May 1968.
Keizai Tenbo — 経済展望, 1 March 1961, Fuji Heavy Industries enters a period of advance.
Shukan Noda Keizai — 週刊野田経済, December 1963, Running a car for the people, by the people.
企業の歴史 : 明治百年 (Corporate Histories: A Century of Meiji, Keizai Shunju-sha, 1968), the SUBARU entry.
Nikkei Business — 日経ビジネス (Nikkei BP), 1997, on the corporate culture behind the concealment of defective vehicles.