May 17, 2002
Fuji Heavy Industries Discontinues Bus and Train Production

�@Fuji Heavy Industries, Ltd. (FHI), a global manufacturer of transportation and aerospace-related products and the maker of Subaru automobiles, today announced that it will discontinue the manufacture of new bus bodies and railway cars during the current fiscal year ending March 31, 2003. The decision to cease production of new buses and trains is part of FHI's restructuring efforts to streamline its unprofitable businesses and strengthen the company's financial foundation. This decision is the first that FHI has made to close down a business unit since 1968, when it withdrew from the production of Rabbit scooters.

�@FHI's Isezaki Plant, where bus bodies are produced, will continue to perform after-sales efforts that include sustaining the supply of repair parts and performing interior/exterior renewal repairs. The facilities at Isezaki will also be utilized for increasing the production of prefabricated houses as well as spare automobile parts, and for expanding into such new automobile-related business areas as alteration parts and accessories. Currently, the majority of bus bodies produced at Isezaki for bus chassis makers go to Nissan Diesel Co., Ltd. (80%), and the remaining share goes to Isuzu Co., Ltd. (20%). Nissan Diesel has already announced that Nishi Nihon Shatai Kogyo will take on its necessary bus body production. Isuzu will entrust Isuzu Bus Manufacturing Ltd. with the bus body production needed to fill its imminent supply gap.

�@Bus production at FHI has a long history that dates back to 1946 in the Nakajima Aircraft Company, which actually predates the founding of FHI. By using a monocoque construction technology initially developed for aircraft, Nakajima introduced Japan's first "frameless" rear-engine bus, called the Fuji, in 1949. After FHI was established in 1953, it continued to apply Nakajima's original technologies and innovations in bus production. In 1956 it jointly developed and launched Japan's first air-suspension bus with Minsei Diesel Kogyo (current Nissan Diesel). FHI also produced Japan's first double-connected bus in 1983, jointly developed with Volvo.

�@FHI's annual bus production peaked in the 1980s, but overall demand for buses has dropped since then, essentially due to Japan's sluggish economy. FHI reacted by substantially altering its assembly lines for more efficient, small-volume production, and that measure did improve profitability. Yet, the decision by Nissan Diesel this January to simplify its supply chain for bus bodies, which inevitably affects FHI's bus operations, prompted the ultimate termination of FHI's bus production. Total bus production by FHI since the establishment of the business amounts to 80,938 units through the end of March 2002.

�@FHI's production of railway cars will be discontinued at its Utsunomiya Plant, whose 130 employees will be transferred to the Eco-Technology Company in June. Some remaining employees will be moved to other FHI operations. FHI's trains have long been supplied to Japan National Railways (current JR) and other private railway systems, and the company has enjoyed a strong reputation as a major diesel railway car manufacturer.

�@FHI's train business also goes back to early days of the company. In 1955, FHI was designated by JR to produce diesel-powered trains for passengers. Since then, the company has supplied primarily express railway cars to JR, including express passenger cars with sleeping berths in 1969, called "Blue Trains," as well as the world's first pendulum-type express diesel cars in 1989. Twenty pendulum-type express cars were delivered to JR Hokkaido as recently as last July. FHI has also provided track maintenance vehicles, electric vehicles, cargo vehicles, and container vehicles, as well as the LE-car, a diesel engine-powered train car for local lines that runs like a city bus with a single driver.

�@Although FHI's innovation and technologies have helped Japan's railways provide comfortable, safe travel, and efficient transportation to passengers and clients, overall rail car demand has declined as railway companies exercise restraint in investment and submit orders irregularly. The decision to discontinue the railway car business came as the consequence of a business environment in which it is difficult to sustain steady production. Total railway car production stood at 10,299 units as of the end of March 2002.



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