Subaru Profits Slip Despite Steady Sales; Self-Betterment and Currency to Blame
After several years of record growth, a combination of increasing costs and exchange losses forced Subaru’s operating profit to fall by 27 percent in its recently ended fiscal year. No longer Fuji Heavy Industries, and now focusing primarily on automotive product, Subaru Corporation announced its operating income had dipped to $3.69 billion in April. Net income also took a hit, falling by 35 percent to $2.54 billion.
Considering the company finally surpassed the one million annual sales mark for the first time in its history, it is surprising to see the brand faced with anything other than glowing praise. However, improved sales and continued revenue growth doesn’t tell the entire story. Subaru’s European sales declined by 2.6 percent — matching the trend in China and Japan. North America, which accounts for the majority of the brand’s sales, maintained its interest but the overall market has slowed.
“U.S. demand has peaked out,” Subaru CEO Yasuyuki Yoshinaga explained. “The market environment has increasingly become tougher. We will carefully the situation and will take the necessary steps to maintain our sales, including incentives.”
North America was still good to Subaru over the last 12 months, though. Regional sales expanded 14 percent to 721,000 annual vehicles. U.S. sales went from 582,700 to 667,600, while Canadian sales grew to 53,100 from 47,600 the previous year.
So why didn’t Subaru make more money? The yen’s appreciation against the dollar had a lot to do with it. Foreign exchange losses accounted for 143.8 billion yen ($1.29 billion), which is notably massive.
Production costs also played a part — $1.52 billion in all, according to Automotive News. Takata’s defective airbag recall hit Subaru harder than most automakers. The brand has also upped its ante in research and development programs and is spending capital to improve production capacity in both Japan and North America.
Subaru will adjust its current assembly schedule to account for the slowing demand. Still, it expects its global sales volume to continue rising to 1.2 million units over the next fiscal year, with an operating income on par with the current figures — assuming exchange rates stabilize.
[Image: Subaru]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
More by Matt Posky
Comments
Join the conversation
Another day I was sitting at Lexus dealer and we talked about perceptions. Then I said about "Subaru perception". The guy said - "you nailed it!"
After reading the headline, I was desperately hoping that warranty costs on the CVT increased so dramatically that Subaru would reintroduce a cog-driven transmission. Wishful thinking...