#ProductionCosts

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.”

The United Auto Workers and the Detroit automakers have been locked in negotiations for months now, as both sides seek to redefine their relationship in the post-bailout era. And though all sides have stressed the importance of avoiding intractable disputes in an alleged new spirit of cooperation, it seems that the prospects of a quick, painless conclusion to negotiations remains elusive. The UAW’s contracts with Chrysler and GM both blew past their deadlines at midnight last night, and Ford, the only manufacturer at theoretical risk of a strike, extended negotiations earlier this week. TTAC has not covered these negotiations in much depth for the simple reason that little information leaks out of them. But with contracts expiring and optimistic rhetoric crashing on the rocks of reality, the frustration is clearly starting to boil over. And who is surprised that Fiat-Chrysler CEO Sergio Marchionne is the first to let his frustration show?