Jeff Walters took over as president and chief operating officer of Subaru of America in April 2023. And largely keeping with Subaru’s culture of promoting longstanding managers from within, he hit the C-suite of the automaker’s Camden, NJ, headquarters in his 31st year at the company.
Reporting to Tomomi Nakamura, who succeeded Tom Doll, who had been CEO for five years and COO for nine years as part of a 40-year stint with the automaker, Walters is running Subaru at a time when sales are strong, the brand seems healthy and the strategy to get to electrification of its showroom is pretty well set.
”We have a culture second to none. I give a lot of credit to Tom Doll for setting up the company for success and how we want to do business and go to market,” says Walters.
Subaru’s strategy to electrify its models calls for investing nearly $10.5 billion by 2030, including $1.7 billion announced before Walters took over. Between now and 2028, Subaru will roll out battery-electrics and hybrids jointly developed with Toyota, which owns a 20% stake in Subaru. It will produce BEVs alongside gasoline-powered cars at its Gunma plant in Japan starting in 2025. After 2028 when Subaru’s BEV plant in Japan opens, the company best known for all-wheel-drive CUVs will turn out its own homegrown, home-engineered electrics.
Despite a slowdown in BEV demand and a slight softening of the Biden Admin.’s EV mandates, Walters says Subaru is sticking to a target of 50% of its sales being BEVs by 2030.
The only BEV Subaru is selling now is the Toyota joint-venture vehicle, Solterra. After supply-chain issues delayed production starting in late 2022, things got back on track and the company sold over 8,000 in the U.S. last year despite a limited range of 230 miles (370 km) and a $45,000 price tag for a vehicle about the same size as the company’s Impreza and Crosstrek.
Subaru customers, fiercely loyal, are also known to be price-sensitive, and Walters, after decades in district, sales, and marketing posts, is well aware of how sales can slip off a cliff if the company doesn’t get its pricing right. Take the Forester CUV. The top price is $33,975 for the Limited trim, far below today’s average transaction price of around $47,000, yet this year’s top-selling Subaru model ranks among J.D. Power’s “Best” for reliability, and it has been named Consumer Reports’ “Best SUV” an amazing 11 years in a row.
The Forester gets a "strong" hybrid version next year, solving one of the few gripes owners have: that fuel economy could be better. The word "strong" is being employed to distinguish it from former "mild" hybrids, and denotes better fuel economy. The tech is coming from Toyota, with similar results as in the Toyota Prius. Indeed, Subaru will introduce eight BEV models by the end of 2028, including four CUVs by 2026. Among them is a CUV EV Toyota will build at its Kentucky plant starting next year.
“This first stage of the transition, the joint-venture vehicles with Toyota, gives us a lot of flexibility, but we are working on our own designs and engineering off what we are learning about electrification from Toyota. Given the pace of adoption, this feels like a very smart strategy that I inherited,” says Walters.
Indeed, Subaru, previously known as Fuji Heavy Industries until the company dropped that name in 2016, has long had a very prideful engineering culture with its own ideas about vehicle architectures, weight balance and driving dynamics long impacted by the boxer engines and all-wheel-drive technology Subaru developed decades ago. General Motors, for example, tried to develop an SUV with Subaru 25 years ago but scrapped the plan when it found Subaru engineers were unwilling to make compromises.
As familiar as Subaru is after 55 years selling in the U.S., it is still considered niche by sales volume, an unusual feat considering it is not a high-margin luxury brand.
Subaru of America ended calendar year 2023 with 632,086 vehicle sales, a 13.6% increase compared with calendar year 2022, per Wards Intelligence. While its headquarters is in Japan, Subaru essentially is a U.S. company. Globally, the company only sold 120,614 vehicles outside of the U.S. Sales goals can be fraught, but the company is publicly aiming for 1.2 million sales a year globally by 2030, including 600,000 BEVs.
It Must Be Love
Walters, who was raised in Marshall, MI and fished in the Kalamazoo River with his father growing up near where a new battery plant is going up, leads a charmed life in landing in the president’s job, which includes having a brand and marketing position that hardly even needs tweaking. Having a sound product plan and marketing plan all at once is a rarity in the auto industry.
Back in 2007, Subaru switched its ad campaigns from traditionally rational ones to emotional ones. The positioning: "Love. It's what makes a Subaru, a Subaru," was born from the simplest conclusions that could be made from owner surveys. So many people said they simply “loved” their Subaru that the company’s marketing execs and ad agency decided to play to it after years of emphasizing practical all-wheel-drive benefits. That led to the company and dealers aligning with fundraising for the Humane Society every year, sponsorships of the Puppy Bowl instead of the Super Bowl and having pens of adoptable puppies at their auto show displays that attract families to the venues in droves.
“Subaru has as sound a marketing platform as I have ever seen, and it seems to have grown organically out of the product line and customer base rather than an idea that was hatched by a bunch of Madison Avenue types who tried to apply it to the brand like wrapping paper,” says Los Angeles-based marketing consultant Dennis Keene.
Historically, Subaru has found that among people who had seen the “Love” ad campaign, awareness of Subaru goes up 27-30 points, familiarity scores triple and those who express an “excellent” opinion goes up 400%.
Lucky Stumbles
One of the almost charming aspects of Subaru is that it has a history of stumbling into success. No one in the company knew when it launched an Outback trim package for the Legacy wagon in the mid-1990s that the idea would almost come to define the whole brand. Similarly, when the company introduced a Crosstrek version of the Impreza subcompact, with elevated ground clearance and some trim bits similar to the Outback, Walters and others inside Subaru forecasted sales of 25,000 a year at best. Some executives thought it would be a flop altogether. But Crosstrek was Subaru’s best-selling model last year and is a close No.2 this year.
The flipside was the failure of the B9 Tribeca SUV two decades ago, the company’s first crack at a conventional SUV for its customer base that was asking for something bigger than the Outback. The long-planned project became so befuddled that executives could not even agree on a name, arguing between B9 and Tribeca, ultimately slapping both on the rear deck to awkwardly end the debate. The subsequent Ascent 3-row utility vehicle has proved sounder, selling about 60,000 a year, and with one name.
Some executives might be restless after 31 years at the same niche automaker, located far away from the rest of the industry in South New Jersey.
Not Walters. “I was lucky. I landed at the right place on the first swing.”
