How Subaru's First Car Nearly Killed Its US Operations

Two Americans, Malcolm Bricklin and Harvey Lamm, convinced Fuji Heavy Industries to sell its small car in the US. It didn't go well.

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FlickrAlden Jewell

Subaru of America turns 50 today, which when you learn the story of its first car, seems like a small miracle. Years before Subaru became a major player with its all-wheel drive boxer-engine family cars, it took a crack at the US market with the 360, a car that made virtually no sense here. A dismal failure that somehow led to one of the most successful companies selling cars in the US.

Subaru of America was started in 1968, but this story really begins when Japan was reconstructing itself after World War II. In 1949, the Japanese government created the Kei car, a set of regulations intended to kickstart the production of small cars to help mobilize the country. In 1955, the Kei car regulations solidified when maximum engine size was upped to 360cc, and three years later, Fuji Heavy Industries entered the market with the Subaru 360.

The 360 was the first mass-produced Kei car, and it was a good one. It borrowed its unibody construction from the larger Subaru 1500 sedan, and offered room for four. Its two-stroke straight-twin only provided 16 horsepower, so Fuji made sure the 360 was light, employing a fiberglass roof. Nicknamed the "Ladybird,", the 360 was a success in its home market, becoming the most popular Kei car in its day.

It was a perfectly sensible car for Japan, with its incredibly high population density and small streets, but compare the 360 with American cars of the same era. US cars were designed for the country's vast expanses of interstate, and were afforded big six- and eight-cylinder engines thanks to the country's cheap fuel.

One gets the impression that Subaru would have never sold the 360 in the US, were it not for American entrepreneur Malcolm Bricklin. In the mid-1960s, Bricklin—the same guy who created the gull-wing SV-1 sports car and later formed Yugo of America—was in the business of selling scooters, when he first approached Fuji Heavy.

that he was interested in Fuji Heavy's "Rabbit" scooter, but the company was winding down production at the time. Bricklin was intrigued by the Subaru 360, however, largely because weighing under 1000 lbs, it would not need to be federalized for US sales. He figured its 66-mpg fuel economy ratings would help make the little Ladybird a hit with thrifty US shoppers. Bricklin and buisness partner Harvey Lamm established Subaru of America in Feburary 1968 in Philadelphia, with the purpose of importing the little 360.

Famously advertised as being "cheap and ugly," the 360's US-market entry was a catastrophe. The 360 was cheap at $1300, but a Beetle was only a few hundred dollars more, and for Americans, the choice between the two was obvious. What sealed the 360's fate, though, was , which labeled the Subaru as "not acceptable."

The magazine derided the car for its perceived sub-par safety—again, remember that the car was light enough to avoid federalization—the 37.5 seconds it took to accelerate to 50 mph, and its dodgy handling at highway speeds. Bricklin recently spoke with Automotive News and recalled the damage done by Consumer Reports.

"Somebody called me and said, "Have you seen Consumer Reports?" I said, "What's Consumer Reports?" Well, we were on the cover of Consumer Reports with a story that said the 360 was a piece of crap compared with a Cadillac. At the time, they had a circulation of half a million. So I thought, so what? Half a million people saw it, out of how many million in the United States?

But the banks all read them. The dealers all read them. And the floorplan just stopped. I mean, it just stopped. Now, I've got cars coming, with letters of credit for them. Not only do I not have cash for the cars, now I need even more money, to put them in storage..."

It's worth noting that the Consumer Reports article never actually compared the Subaru 360 to a Cadillac, but Bricklin is right in saying it killed whatever hope Subaru had.

What happened afterwards is pretty ridiculous. An that dealers stuck with unsold inventory would sell two 360s for the price of one, or one for $1, if you bought a different car. Bricklin himself created where anyone could come and race a 360 around a go-kart track for a $1 per lap. The cars were given fiberglass bodies designed by dune-buggy legend Bruce Meyers, but most were destroyed.

Fuji Heavy back in Japan was embarrassed by the whole thing, Bricklin told Automotive News. He and Lamm had to beg company executives to renew their contract, so Subaru of America could start selling its newest car, the front-wheel drive, boxer-engine FF-1. Eventually, Fuji Heavy relented, and Subaru of America survived.

Fuji Heavy bought importation rights back from Bricklin and Lamm in 1971, and the former exited Subaru in 1972. Lamm stayed until 1990, when Fuji Heavy bought Subaru of America outright.

Subaru of America didn't support the 360 for years, but the car still managed to develop a cult following in the US. Now, it's considered a rare collector's item.

Bricklin perhaps isn't the most reliable narrator, but his interview with Automotive News does reveal how close Subaru came to leaving the US market. It was an auspicious start for a company that's considered a huge success story now.

For more on the 360, check out these great stories , and . The is archived on a 360 owner's club site too. Bricklin's interview is also included in , which is well worth your time.

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