June 30, 2004

Fuji Heavy Industries Concludes OEM Agreement with German Diesel Engine Manufacturer
Motorenfabrik HATZ GmbH


  Fuji Heavy Industries Ltd. (FHI), a global manufacturer of aerospace-related products, industrial products and the maker of Subaru automobiles, today announced it has concluded an OEM agreement with Motorenfabrik HATZ GmbH & Co. KG (HATZ), a German diesel engine manufacturer. Under the agreement, HATZ will manufacture and supply small-sized, single-cylinder, air-cooled diesel engines, which FHI will market under the Subaru/Robin brands on a worldwide basis1 beginning in the first quarter of 2005. FHI plans to introduce these diesel models as successors to the current Subaru/Robin DY diesel engine series.

  In order to better accommodate many different markets, FHI and HATZ will jointly modify three existing models of the HATZ 1B series of single-cylinder, air-cooled diesel engines: the 1B20 (232-cc capacity, 3.5-kW/3600-rpm maximum output); the 1B30 (347-cc capacity, 5.6-kW/3600-rpm maximum output); and the 1B40 (462-cc capacity, 7.7-kW/3600-rpm maximum output). In addition, FHI plans to add another model with an intermediate engine capacity between that of the 1B20 and the 1B30.

  All the models in the HATZ 1B series meet the stringent U.S. EPA Phase I emission standards, and each model is in the process of complying with the EPA Phase II emission standards, which will soon be in effect. They are also scheduled to meet the voluntary emission control guidelines, set forth by the Japan Land Engine Manufacturers' Association, which are slated to take effect in 2006.

  The agreement between FHI and HATZ also grants FHI exclusive rights to market multi-cylinder diesel engines manufactured by HATZ under FHI's own brand in Japan and Asia. This arrangement will strengthen FHI's diesel engine lineup for a wider variety of industrial machinery customers, as well as those in the construction trades, and enable FHI's diesel model lineup to complement its wide range of gasoline models.

  The agreement further represents the first strategic step in long-term cooperative relationship between FHI and HATZ that is intended to enhance and complement each other's distribution and service networks on a global scale.

  FHI is one of Japan's top industrial engine manufacturers, with annual production of over one million units. HATZ is a leading diesel engine manufacturer, specialized in high-quality, high-performance diesel engines with a variety of power outputs, from 3 kW to 50 kW. In addition, the company supplies major automotive manufacturers components such as connecting rods and crankshafts.

NOTE 1: Except in the Latin/South American countries

About Motorenfabrik HATZ GmbH & Co., KG (As of fiscal 2002)

Head office: 94099 Ruhstrof a.d. Rott, Germany
Managing Director: Walfram Hatz jun.
Employees: approx. 1,200
Annual sales: approx. 1.5 billion yen
Annual production volumes: 60,000 diesel engines; 2.2 million connecting rods; 8000 crankshafts
Sales subsidiaries: 14 (8 in Europe; 3 in Americas; 1 each in China, Australia, and South Africa)
Sales and service: 94 sales outlets, 507 service locations around the world





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