GM buys into Subaru
December 9, 1999
In a bid to increase its presence in Asia, General Motors Corp. will spend $1.4 billion for a 20 percent stake in Fuji Heavy Industries Ltd., the Japanese automaker that builds Subarus.
The deal signed in Tokyo today will allow GM and Fuji to share technology and development of new models. GM will become Fuji’s largest shareholder, but Fuji will keep an independent management.
”This is a partnership that will make both GM and Fuji stronger companies in an increasingly competitive, global industry,” said G. Richard Wagoner, GM’s president and chief operating officer.
The partnership will focus on small and midsize SUVs, four-wheel-drive systems and continuously variable transmissions (CVTs) a kind of automatic transmission that doesn’t use gears for small cars.
”GM needs to strengthen its presence in Japan. Fuji would like to boost its presence in North America and Europe,” said Takeshi Tanaka, president and CEO of Fuji. ”Where there is a need, we will move aggressively together to meet it.”
David Healy, an industry analyst with Burnham Securities, said Subaru’s technology was the real prize for GM.
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”This will give them access to some technology CVTs, engines, and so on, that they may not have to spend equivalent bucks to develop themselves,” he said.
The agreement also gives the world’s largest automaker another tool to pry open the Asian market. With much of the region recovering from an economic crisis, many automakers expect the vehicle market to grow faster than in North America and Europe over the next several years.
GM sold 443,000 vehicles in Asia and Australia last year and has just 4 percent of the market; executives set a goal of 10 percent by 2005.
GM already owns a 49 percent stake in Isuzu Motors and 9.9 percent of Suzuki Motor Corp. Both Japanese companies already are developing joint vehicles and engines with GM for use worldwide. Wagoner also said GM was in talks with Korean automaker Daewoo.
About 90 percent of Fuji Heavy’s $11 billion in sales last fiscal year came from Subaru. The company employs about 15,000 people and has factories in China, Taiwan, Thailand and Japan, and a joint venture with Isuzu Motors in Lafayette, Ind.
The partnership continues a trend in the auto industry of companies joining forces to survive. Many auto executives are convinced that only the largest companies with the ability to spread development and manufacturing costs over millions of vehicles worldwide will survive.