In January 2003, a significant shift occurred in the landscape of Isuzu SUV production in North America. Fuji Heavy Industries (FHI), the parent company of Subaru, acquired full ownership of Subaru Isuzu Automotive Inc. (SIA), dissolving the joint venture with Isuzu Motors Limited. This move, prompted by declining Isuzu SUV sales, resulted in the renaming of SIA to Subaru of Indiana Automotive, Inc., while retaining the familiar “SIA” abbreviation.
The End of a Joint Venture and the Birth of a New Partnership
The dissolution of the SIA joint venture was primarily driven by the significant decline in sales of Isuzu SUVs in the North American market. This decline led to underutilization of the SIA production facility, making continued joint operation unsustainable. As a result, Isuzu transferred its 49% stake in SIA to FHI for a nominal fee of US $1.00. This price reflected a prior capital injection to cover Isuzu’s losses and the asset valuation of its portion of SIA.
The Subaru of Indiana Automotive plant in Lafayette, Indiana.
Isuzu SUV Production Continues Under Subaru’s Management
Despite dissolving the joint venture, Isuzu and FHI entered into a production agreement. SIA, now a wholly owned subsidiary of FHI, continued to manufacture Isuzu SUVs, including the Rodeo, Rodeo Sport, and Axiom models. This agreement ensured the continued production of approximately 30,000 Isuzu vehicles annually, commencing in January 2003. This strategic decision allowed Isuzu to streamline its North American operations and improve its overall business efficiency, aligning with its newly released three-year business plan.
The Isuzu Rodeo was one of the models produced at SIA.
SIA: A Key Player in Subaru’s North American Growth Strategy
For FHI, the acquisition of SIA represented a crucial step in its North American expansion plans. The company aimed to achieve annual sales of 300,000 vehicles in the region, as outlined in its mid-term business plan, FDR-1. Full ownership of SIA allowed FHI to optimize production capacity, efficiently balance production between its Japanese and U.S. facilities, and increase its Subaru vehicle output. This move solidified SIA’s role as a vital component of FHI’s global manufacturing strategy. Masayoshi Nagano, the then-current president of SIA and Senior Vice President of FHI, remained at the helm of the newly restructured company.
A Strategic Shift for Both Automakers
The transfer of SIA ownership and the subsequent production agreement marked a pivotal moment for both Isuzu and Subaru. For Isuzu, it provided a path towards restructuring its North American operations and focusing on long-term sustainability. For Subaru, it presented a significant opportunity to bolster its manufacturing capabilities and accelerate its growth in a key market. This strategic realignment ultimately benefited both companies, enabling them to adapt to evolving market conditions and pursue their respective business objectives. The change in ownership did not affect SIA’s workforce of approximately 2,900 employees. The facility, located in Lafayette, Indiana, continued to operate without interruption, producing both Subaru and Isuzu models.
