Subaru's Impreza Geared To Slow Long Sales Slide

SUBARU, always a minor player among the Japanese giants, is counting on a small car to help it make a big comeback.

But will the Impreza make an impression on jaded American motorists?

For years, Subaru of America was the only United States-owned Japanese import. It had a reputation as a reliable, if quirky, brand. Subaru put an emphasis on four-wheel-drive, which helped it carve out a loyal following in the snowy climes of Colorado and New England.

Back in 1986, Subaru sales hit a record 183,242, not bad when you consider the carmaker was limited to one main offering: the subcompact Loyale.

So, company officials reasoned they were in for a big growth spurt when they added a couple more product lines, first the minicompact Justy and then the compact Legacy. But things didn't work out quite as planned.

After more than a decade of steady growth, sales began to tumble. By last year volume had slipped to 104,800 units. Steady profits turned into wrenching losses. By mid-1990, Subaru of America's US owners were forced to sell to their Japanese supplier, Fuji Heavy Industries.

Industry analysts say several things went wrong. "For Subaru, the problem has been image and awareness," says Chris Cedergren, an auto analyst at the AutoPacific Group. "No one knows just how good their products are."

There were other problems. The weak dollar drove up prices. New competitors introduced their own four-wheel-drive models. But perhaps worst of all, Subaru simply failed to maintain its core products. By the end of 1992, the Loyale had been on the market for more than seven years, an eternity in a product segment where Japanese models are typically updated every three to four years.

So Subaru is counting on the Impreza to halt its fall. "It's the Impreza that will bring us back," says Ken Stanton, the company's marketing manager. "We feel we're at the bottom and with the Impreza, you'll see a significant increase in sales next year."

Initial reviews in the automotive press have been generally favorable. Critics praise the car's styling, especially the Sport Wagon. They note that the Impreza is loaded with a lot of features normally available only as options - if at all - on comparable products. But the biggest selling point may be the Impreza's price. The base model carries a sticker of $10,999. A fully loaded wagon with an automatic transmission tops out at $17,599.

The typical Impreza will cost about $300 less than a comparable Honda Civic and about $1000 less than a similarly equipped Toyota Corolla.

To launch the new line, Subaru will fund the biggest advertising campaign in its history. (Impreza will take more than half the company's 1993 advertising budget of $100 million.)

The campaign will have a heavy emphasis on network television commercials featuring Kirstie Alley, star of the sitcom Cheers. While the campaign will focus on Subaru's strong markets, the company will also target areas where brand awareness is low.

"We think we have some opportunities in areas like Southern California, where we've never done very well," says Chuck Worrell, executive vice president of Subaru.

If the Impreza meets its initial target, it will trigger Subaru's first sales upturn since 1986. A confident Mr. Worrell predicts volume will reach 130,000 over the next few years.

But "long-term, we have to think about other models," says Yoshi Ohara, who heads product planning, and "more market-driven products."

What Subaru planners - and dealers - would like most is a sport-utility vehicle. It would play perfectly into changes in the market. Many of Subaru's past customers have traded in their Loyale wagons for vehicles such as the Toyota 4Runner and the Ford Explorer.

Subaru spent almost three years trying to work out a deal with Isuzu Motors to swap products. Subaru would have gotten a version of the Isuzu Rodeo. In exchange, Isuzu would have gotten its own version of the Subaru Legacy. But the talks collapsed when Isuzu announced late last year a deal with Honda. Honda will begin marketing a re-badged Rodeo early in 1994.

Subaru does have another possibility. Through its close ties with Nissan, it may be able to get a version of the Nissan Pathfinder sport-utility vehicle. "But I can't say [it will happen] today," Mr. Ohara says.

For the moment, Subaru is counting on the Impreza to shore up sales. Long term, however, survival may depend on the replacement for the Legacy. Due out in 1995, Mr. Cedergren says the next Legacy is likely to be the make-it-or-break-it car for Subaru of America. "If it doesn't succeed, they're going to be cast out of the [US] market."

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