Fuji Heavy eager to discuss Toyota Camry contract

Fuji Heavy Industries Ltd. President Yasuyuki Yoshinaga said the maker of Subaru cars is preparing to begin talks to renew its contract to build Camry sedans, the best-selling car in the U.S., for Toyota Motor Corp.

While the company has orders to build the Camry until the model is overhauled in about four years, Fuji Heavy doesn't know whether Toyota will retain its services for the next generation of the midsize sedan, Yoshinaga said this week.

Fuji Heavy, which uses about a third of its U.S. manufacturing capacity for the Camry, needs to know soon to determine its own expansion plans, he said.

"My hope is that we can have a decision about the future direction within this year," Yoshinaga said. "We would like to maintain Camry production."

Renewing the deal would extend Subaru's reliance on Toyota as the European crisis, slowing Chinese economy and the strength of the yen threaten earnings growth.

For Fuji Heavy, dropping Camry manufacturing would give the company room to expand production of its more profitable Suburu Outback sport utility vehicles and Legacy sedans in the U.S. without having to build another factory.

"They may want to focus on producing their own vehicles if they think of the short-term benefits," said Mitsushige Akino, who oversees about $600 million at Ichiyoshi Investment Management Co. "But it's more important to lay a solid foundation for the business in the longer term."

Toyota spokesman Joichi Tachikawa said he couldn't immediately comment on Fuji Heavy's future production of the Camry.

Yoshinaga, 58, also said Fuji Heavy will propose developing more automobiles with Toyota to build on the success of their latest sports car — called the BRZ for Subaru and 86 for Toyota.

The move would deepen a partnership that began in 2005 when Toyota bought 8.7 percent of Fuji Heavy. It raised the stake to 16 percent three years later. This year, they started selling a codeveloped sports car and Subaru plans to begin offering its first hybrid vehicle — based on Toyota technology — in 2013.

Fuji Heavy has been devoting some of its capacity, 37 percent of its total in the U.S. last fiscal year, to make the Camry for Toyota since 2007.

Still, Fuji Heavy is allocating some of its factory space to Toyota at the expense of its Subaru-brand cars. Because of the shortage of capacity in the U.S., Fuji Heavy is cranking up production in Japan, making itself more vulnerable to the yen.

The Camry generates operating profit margins of about 2 percent to 3 percent for Fuji Heavy, while the Subaru Legacy and Outback yield margins exceeding 10 percent, according to estimates by Koichi Sugimoto, a Tokyo-based analyst at BNP Paribas SA.

Fuji Heavy plans to increase Japanese production this fiscal year to account for 78 percent of total output, the highest proportion in the industry. The company is doing this at a time when companies from Toyota to Nissan Motor Co. and Mazda Motor Corp. are expanding overseas to escape the yen.

Fuji Heavy also plans to pursue cooperation with Toyota by proposing to expand the lineup of their jointly developed sports car, Yoshinaga said.

Subaru sold 3,551 BRZs in Japan in the first two months, almost quadruple the company's initial target, and is starting sales of the two-door coupe in the U.S. this year. People placing an order now will have to wait until next March to get the car, he said.

"Since the BRZ/86 is so popular, it's natural to consider expanding the lineup," he said. "For example, adding a BRZ sedan."

Fuji Heavy hasn't always benefited from its ties with Toyota. In May it revised its midterm plans after it failed to win Chinese government approval to build a plant in the country, which would allow the company to avoid a 25 percent import tax.

China didn't approve Fuji Heavy's application to form a venture with Chery Automobile Co. because the government views such a move as tantamount to giving Toyota a third partnership in China, exceeding regulatory limits, three sources said last year. Toyota has ventures with Guangzhou Automobile Group Co. Ltd and China FAW Group Corp.

Discrimination alleged

A Toyota Motor Corp. affiliate in Turkey has allegedly fired 143 of its employees because of their religious beliefs and practices, the Turkish newspaper Today's Zaman reported Wednesday in its online edition.

Toyota has vehemently denied the allegation, saying the employees were laid off due to a reduction in vehicle output stemming from the 2011 Tohoku earthquake and tsunami and from the global economic crisis, the newspaper said.

According to the report, which cited another Turkish daily, the Star, and other sources, Toyota dismissed 143 employees in March and April.

An unnamed former general manager of a Toyota Boshoku Corp. factory producing supply materials for Toyota vehicles reportedly said in a letter to the Star that he was laid off because of his religion.

"I was banned from attending the Friday prayer. I was accused of being a member of an Islamic terrorist organization just because I was praying," he was quoted as saying.

Toyota's local unit released a statement saying that the company ended contracts with the 143 employees based on agreements following a decrease in output. It also said the company respects freedom of religion, such as by setting up prayer rooms, and that it regrets groundless accusations.