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The Japanese automaker, which experienced rapid growth early this decade fueling US demand for sport utility vehicles, said Monday it was not meeting its target for US shipments and that its profit margins reduced. Subaru's net profit for the current fiscal year, ending in March, is expected to fall to less than half of the peak.
The problems are partly temporary. Last week, Subaru recalled more than 400,000 Toyotas manufactured by Subarus and Subaru for breakable engine parts, a decision that wrecked an operating profit of nearly $ 500 million.
The company said it missed opportunities in the US because it did not have enough vehicles. "We have a bit of trouble with production," said Toshiaki Okada, Subaru CFO.
The company's Indiana facility did not build enough of the new Ascent, a seven-seat SUV with 19 cupholders. Factory workers have struggled to build climbs fast enough while maintaining quality, Okada said.
Subaru is expected to record its third consecutive year of declining profits. The company's operating margin was generally 3.7% during the six-month period in September, compared to about 13% last year.
Subaru plans to sell 1.04 million vehicles in the year to March, compared with 1.07 million units previously.
A corporate plan adopted in July by new CEO Tomomi Nakamura asks Subaru to increase its market share in the United States to 5%, compared to just under 4% at present.
In Japan, Okada said Subaru was struggling with problems on its inspection lines at a factory where the company had acknowledged that workers were testing vehicles inappropriately. He added that efforts to properly inspect vehicles have slowed production. The company announced Monday that it would recall 100,000 additional cars to Japan for recently discovered problems related to vehicle inspection.
Takaki Nakanishi, a Tokyo-based automotive analyst, said the slowdown in sales is "an issue of supply, not a demand problem. The demand is strong, the products are selling well. "
Even without the costs of recalls, Subaru's operating income for the six months ended September would have declined by more than a third.
One reason is the growing bill of financial incentives in the United States. Subaru is offering 0% financing on some of its top-selling vehicles, a common tactic used by automakers to reduce inventories before the model is refreshed. Subaru started selling a new Forester sport utility vehicle in September.
Overall, US interest rates are rising, raising the subsidy bill that Subaru offers to its customers.
Subaru said it spent an average of about $ 2,200 per vehicle on financial sweeteners for customers, up from $ 1,800 last year. The company said that selling new models such as Ascent and the Forester would limit its spending into incentives. New vehicles are usually offered with less business.
Mr. Nakamura, General Manager of Subaru, said he was particularly concerned about Subaru's quality problems, which he accused of growing too fast. Subaru's sales volume increased from 825,000 in 2014 to more than $ 1 million last year.
"There have been a lot of problems with recalls recently. The cause could probably be due to excessive effort for growth, "said Nakamura.
Write to Sean McLain at [email protected]
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