TOKYO - General Motors and Fuji Heavy Industries Ltd. are finalizing plans for a jointly developed vehicle that could be built at Subaru's plant in the USA by 2004 or 2005.
The vehicle, a sport wagon to be badged for both companies, would be the first positive result of the alliance the two formed in December 1999, when GM bought a 20 percent stake in Fuji, the maker of Subaru cars. They have been promising close cooperation ever since but have provided few details.
In Europe, the sport wagon could be badged as a Saab.
'This year is the year when we should act with our partners,' Takeshi Tanaka, Fuji's president, told reporters in January when he announced Subaru's 2001 sales plan.
At the Los Angeles auto show in January, GM showed an all-wheel-drive rally car concept that uses the Subaru Legacy platform and a 2.0-liter Subaru engine. It's not clear how much influence that concept, the Chevrolet Borrego, will have on the joint sport wagon.
According to a Subaru source, GM and Fuji are close to an agreement after several days of intensive discussions in Detroit.
The broad outline of the joint project calls for a sport wagon in the traditional Subaru mode: lower to the ground than a sport-utility, with all-wheel drive and powered by a Subaru six-cylinder horizontally opposed engine.
The engine is likely to be a 3.0-liter unit, in line with a projected downsizing trend in the USA.
Fuji initially aims to sell between 24,000 and 36,000 of the vehicles a year under the Subaru brand in the USA, said Hideo Wada, Fuji's senior vice president in charge of overseas sales. He added that he hoped the sales target could be doubled.
The vehicle would debut in three or four years.
Two key questions remain and were among the main points of the talks between the two companies: what GM badges the vehicle will wear and where it will be built.
Wada says that labeling the car as a Saab or a Pontiac rather than a Chevrolet makes the most sense. Saab and Pontiac would be more consistent with the premium nature of the Subaru brand, he said.
'Chevrolet is a mass brand,' Wada said. 'The purpose of our alliance is to get the most out of Subaru's features.'
Giving the car a premium brand also would allow higher pricing. 'Subaru's powertrain is expensive, and they need a prestige badge to pay that off,' said Takaki Nakanishi, an analyst at Merrill Lynch Japan.
The Subaru side favors building the new model in the USA at Subaru-Isuzu Automotive Inc., a Lafayette, Indiana, joint venture between Fuji and Isuzu Motors Ltd.
The plant makes the Subaru Legacy and Isuzu Rodeo.
Furthermore, 'Subaru-Isuzu Automotive is already experienced in making the engine,' Wada said.
Subaru has an ambitious plan to boost sales in the USA by 40 percent to 240,000 units in the fiscal year ending March 31, 2005.
That sales target does not include GM-Subaru vehicles, so it could increase if the project proceeds earlier than planned.
To achieve the target, Fuji will boost annual output at its Lafayette plant by roughly 70 percent to 162,000 by March 2005 at a cost of some $150 million.
The factory expansion covers higher output of existing vehicles, not the new sport wagon. Subaru will have to expand Subaru-Isuzu Automotive capacity further if it adds the new vehicle to the mix.
That should not be a problem, because the Subaru-Isuzu Automotive plant occupies less than 10 percent of the site.
Looking ahead, some analysts speculate that GM or Fuji could take over the plant entirely by buying Isuzu's 49 percent stake.
Last year, Isuzu made 100,000-plus Rodeos and other models there. But it lost $22 million on its sport-utilities, half of its total losses from North American operations in the six months that ended September 30.
GM, which owns 49 percent of Isuzu, has been suggesting publicly that its struggling Japanese partner should drop its unprofitable businesses.
Isuzu has so far ignored the suggestion. It plans to roll out a new sport-utility, the Axiom, at the Lafayette plant in April and aims to produce 2,000 a month.