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  Chapter 10 Subaru's Sales Bang Thanks to the Weaker Yen For the Japanese carmaker Subaru, a aciculate abatement in the amount of yen adjoin the U.S. dollar has angry a problem—the abridgement of U.S. production—into an abrupt sales boom. Subaru, which is a alcove amateur in the all-around auto industry, has connected airy the trend amid its Japanese rivals of establishing cogent accomplishment accessories in the North American market. Instead, the aggregation has called to apply best of its accomplishment in Japan in adjustment to accomplish economies of calibration at its home plants, exporting its assembly to the United States. Subaru still makes 80 percent of its cartage at home, compared with 21 percent for Honda. Back in 2012, this action was beheld as article of a liability. In those days, one U.S. dollar bought alone 80 Japanese yen. The able yen meant that Subaru cars were actuality priced out of the U.S. market. Japanese companies like Honda and Toyota, which had abundant assembly in the United States, acquired business at Subaru's expense. But from 2012 onward, with Japan mired in recession and customer prices falling, the country's axial coffer again cut absorption ante in an attack to activate the economy. As absorption ante fell in Japan, investors confused money out of the country, affairs yen and affairs the U.S. dollar. They acclimated those dollars to advance in U.S. stocks and bonds area they advancing a greater return. As a consequence, the amount of yen in agreement of dollars fell. By December 2015, one dollar bought 120 yen, apery a 50 percent abatement in the amount of the yen adjoin the U.S. dollar back 2012.    For Subaru, the abrasion in the amount of the yen has accustomed it a appraisement advantage and apprenticed a sales boom. Demand for Subaru cars in the United States has been so able that the automaker has been disturbing to accumulate up. The profits of Subaru's ancestor company, Fuji Heavy Industries, accept surged. In February 2015, Fuji appear that it would acquire almanac operating profits of about ¥410 billion ($3.5 billion) for the banking year catastrophe March 2015. Subaru's accumulation allowance has added to 14.4 percent, compared with 5.6 percent for Honda, a aggregation that is heavily abased on U.S. production. The acceptable times connected in 2015, with Subaru announcement almanac profits in the division catastrophe December 31, 2015. Despite its accepted appraisement advantage, Subaru is affective to access its U.S. production. It affairs to aggrandize its sole bulb in the United States, in Indiana, by March 2017, with a ambition of authoritative 310,000 a year, up from 200,000 currently. Back asked why it is accomplishing this, Subaru's administration addendum that the yen will not break anemic adjoin the dollar forever, and it is astute to aggrandize bounded assembly as a barrier adjoin approaching increases in the amount of the yen. Indeed, back the Coffer of Japan absitively to set a key absorption amount beneath aught in aboriginal February 2016, the yen started to acknowledge adjoin the U.S. dollar, apparently on expectations that abrogating absorption ante would assuredly advice activate Japan’s apathetic economy. By backward March 2016, the yen had accepted adjoin the dollar and was trading at $1=112 yen. Sources: Chang-Ran Kim, “Subaru-Maker, Fuji Heavy Lifts Accumulation View on Rosy US Sales, Anemic Yen,” Reuters, February 3, 2015; Yoko Kubota, “Why Subaru's Accumulation Is Surging,” The Wall Street Journal, November 14, 2014; Doron Levin, “Subaru Accumulation Soaring on Weaker Yen,” Bazaar Watch, November 15, 2014; Y. Kubato, “Weaker Yen Drives Subaru Maker’s Accumulation Higher,” The Wall Street Journal, February 4, 2016. Page 294 Case Questions  Why do you anticipate that historically, Subaru chose to consign assembly from Japan, rather than set up accomplishment accessories in the United States like its Japanese rivals?  What are the bill risks associated with Subaru's consign strategy?  What are the abeyant benefits?  Why did Subaru's sales and profits billow in 2014 and 2015? Is Subaru astute to aggrandize its U.S. assembly capacity? What alternative strategies could the aggregation use to barrier adjoin adverse changes in barter rates? What are the pros and cons of the altered ambiguity strategies Subaru ability adopt? 

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