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Subaru Technology Is Key Aspect Of GM, Fuji Deal
DETROIT, Michigan, Dec 11 (AFP) - General Motors' tie-up with Fuji Heavy Industries, confirmed Friday, gives the world's number-one automaker access to some key Subaru technology at an attractive price, analysts said. Fuji's all-wheel drive and new transmission technology is key to the smaller sports utility vehicles (SUVs) or cross-over SUVs that are gaining ground in the global car market, industry experts said here. "The market for smaller SUVs is just emerging, but the industry is anticipating significant growth in this market in the United States," said Dennis Virag, a consultant with Automotive Consulting in Ann Arbor, Michigan. "Subaru's technology is certainly viable in the United States." Also topping GM's shopping list was Subaru's continuously variable transmission (CVT), which GM sees as an essential component of engineering for smaller cars, GM spokesman Tony Cervone said. The engineering, which is still in development, is smoother, more responsive and has better fuel economy than most other transmissions with fixed shifting points. Strategically, the timing of the deal allows GM to pick up a sizeable chunk of Fuji at an advantageous price just as the Southeast Asian car market is rebounding. The deal itself has GM paying $1.4 billion for a 20 percent stake in Japan's Fuji Heavy Industries Ltd., maker of Subaru vehicles, in a worldwide partnership in design, development and manufacture of cars, trucks and related technology. Virag, the consultant, stated that this is the best time to enter in terms of entry costs. Due to the deflated car market in Asia, it's lower than it has been previously. Japan is still basically in recession, and other Southeast Asian countries are still trying to come back from the Asian financial crisis. Virag believes that it's a particularly good deal when seen in light of the approximately $6 billion Ford paid for Volvo in 1998, or Jaguar's $2.5 billion price tag.
GM's 20 percent of Fuji could be the first step toward total control of Subaru at some point, according to analyst Lincoln Merrihew with Standard and Poor's/DRI, in Cambridge, Massachusetts. "GM is aggressive in some ways, and in some ways cautious. They could see how the arrangement works out on a 20 percent trial basis and if it works out, they could go for the rest. Complete control of Subaru at some point would bring all earnings and profits back to GM," he said.
Newswires |
