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.”
“Washington is not a place to live in. The rents are high, the food is bad, the dust is disgusting and the morals are deplorable. Go South, young man, go South and grow up with the country.” —Not Horace Greeley
Subaru generates 60 percent of its global sales in the United States. For a Japanese brand that still relies on imports for half of its volume in its largest market, Subaru knows that 60-percent reliance on America is way too high.
Subaru needs strength in other markets. Subaru needs to diversify its portfolio. Subaru needs another America.
Unfortunately for Subaru, history suggests the brand won’t quickly find strength in other markets. History suggests Subaru’s attempts to diversify its portfolio won’t succeed.
Fortunately for Subaru, however, there is more America.
“It’s true we want to increase sales in other countries, but in terms of the place with the best chance to increase sales, it has to be America’s Sun Belt,” Yasuyuki Yoshinaga, CEO at Subaru’s Fuji Heavy Industries parent company, told Bloomberg.
In other words, Subaru wants to add some New Orleans to its order of New Hampshire; Burlington with a side of Birmingham; Kennebunkport supplemented with a dose of Port St. Lucie.
It was a bombshell decision that Fuji Heavy Industries describes as “extraordinary.”
Subaru’s parent company announced today that its board of directors has decided to eliminate its industrial division to free up resources for its car division. FHI built its empire on small industrial powerplants, spawning a quirky car company in the process, but that car brand is now the corporation’s main focus.
What does the new love mean for Subaru?
Subaru’s parent company plans to change its name from Fuji Heavy Industries to, simply, Subaru Corporation. Why? Because #branding, of course.
In an effort to leverage the recognition of its Subaru brand, the transportation giant says the move away from its long-winded company name will help grow Subaru as a distinctive global presence in the automotive and aerospace industries.
Fuji Heavy Industries currently has four divisions: Automobile, Aerospace, Industrial Power Products, and Eco Technology.
Fuji Heavy Industries, the Subaru’s corporate parent, had a 400% increase in operating profit due to strong U.S. sales for that brand. North American sales for Subaru in its largest market were up 30% to 116,000 unites in the quarter just ended. Fuji’s operating profits were 69.64 billion yen ($739.6 million), up from 17.33 billion yen ($184.05 million) last year, a record for quarterly profits for that company.
That Subaru is still thriving is in itself a minor miracle. The small Japanese car makers have either imploded (Isuzu), are threatening to (Mitsubishi), or have sought shelter (even Subaru is now 20% owned by Toyota). Subaru did have its own near-death experience in the early nineties. But in a long string of wild bets, Subaru’s final card in the US was a big gamble on AWD, and the timing couldn’t have been better. And like most successful gamblers, there have been losses along the way (see above). But perhaps because of the bumpy ride, Subaru is still alive and kicking.
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- Dusterdude When there is a strike the union leadership talk about “brothers and sisters “ . They should give up that charade . Bottom line is they are trying to wring out every last penny they can and could care less ( putting it politely) about the future of the industry 5 - 10 years+ down the road
- Ronin They all will back off, because the consumer demand is not there. Even now the market is being artificially propped up by gov subsidies.
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