By on May 9, 2017

Subaru Legacy 2018 Logo Emblem Grille

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]

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11 Comments on “Subaru Profits Slip Despite Steady Sales; Self-Betterment and Currency to Blame...”

  • avatar
    SCE to AUX

    “U.S. demand has peaked out,” Subaru CEO Yasuyuki Yoshinaga explained.

    Not for Subarus, it hasn’t. Because love.

  • avatar

    At first glance I thought that was a pic of a Ford

  • avatar

    Nice to see a company smart enough to be willing to entertain the concept. You don’t always have to get bigger, you just have to stay profitable at the numbers you are able to sell.

  • avatar

    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!”

  • avatar

    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…

    • 0 avatar

      Surprisingly enough, Subarus of the past five years have been very reliable and durable for the owners that I know.

      There is no dealership within 120 miles of my area, so buying a Subaru is a pre-meditated and focused act.

      They’re mostly used in my area by people who live in the mountains, and the Subies have been remarkably problem free, even the CVT.

      CV-boots still need a lot of TLC, but the owners can see that one comin’ by the cracks that first appear on the CV-boots. Still not cheap to do.

    • 0 avatar
      SCE to AUX

      I’m vainly hoping for a return of the I-4 engine.

    • 0 avatar

      I know a guy who drives 30-40K miles annually, and the only cars he buys are Outbacks. Obviously an anecdote but it doesn’t get much more reliable than that.

      CVTs get an unfairly bad rap. I have had a Maxima, Accord and Fit rental, and they were decreasingly fun in that order. Why? Horsepower. IMO if a car needs a stick to be fun or feel adequate for the street it’s probably too slow.

      • 0 avatar

        I think the CVT reliability stuff is wildly overblown, although not totally unfounded, as Nissan has been replacing CVTs in Pathfinders in the very not-so-distant past (2013-2014). My sister in law has over 180k on her 2010 Rogue’s CVT, never a hint of trouble, my brother keeps a close eye on the fluid life and it’s still on the original fill as I remember.

        The wear is dependent on the torque load and associated heat being generated (ie how powerful an engine, how heavy of a car, how hilly and how much stop and go is being done, how aggressive is the driver).

        At this point I’d feel comfortable buying a sedan or compact crossover with a CVT (new with a warranty). Used I’d be a bit more leary, and finally for heavier midsize+ SUVs/vans, I’d generally avoid them unless there was a super extended factory warranty. Just my take on it.

        • 0 avatar

          Depends how long you plan to keep it too. It still surprises me that folks keep cars for 7, 8, 10 years. I’d pull what’s left of my hair out from boredom.

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