Subaru Corp. saw its operating profit fall 48.5% to 195.5 billion yen, or $1.76 billion in 2019. The drop came as a result of falling sales in its home market, higher incentives to move its vehicles and a jump in warranty costs.
The Japanese automaker’s net income slid 33% to 147.81 billion yen, or $1.33 billion, while revenue fell 2.2% to 3.16 trillion yen, $28.51 billion, for fiscal year 2019.
The company’s financials were hurt in a variety of ways, such as worldwide wholesale volume falling 6.3% to 1 million units. Additionally, Subaru suffered to due quality problems at its plant in Gunma, which was forced to shut down for nearly two weeks.
The quality problems were mostly confined to vehicles sold in Japan, but losing 10 production days – and 30,000 vehicles – to address the problem hurt the company’s bottom line. Additionally, the company had to recall thousands of vehicles with the problems.
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Sales in its home market fell 17% last year, but North America is Subaru’s largest market and it continues to ride strong sales in the U.S. to help offset the issues in other areas. Subaru expects to post its 11th straight year of record sales in 2019, and retail sales climbed 7.7% in April – the 89th straight month of sales gains, Automotive News reported.
However, Subaru has had issues in the U.S. Last fall, Subaru of America issued a recall and stop-sale for all U.S. 2018 Outback crossovers and Legacy sedans – 228,648 vehicles – because of a software programming error that can cause the low-fuel warning light to fail to illuminate.
The company is also spending big on incentives to keep sales humming in the U.S., which is affecting the company’s U.S. profits.
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In overseas markets, Subaru kept strong momentum on retail sales, as the newly-introduced Ascent led sales in Subaru’s largest North American market. On the other hand, consolidated overseas unit sales fell 4.3% to 865,000 units, for reasons including decreased deliveries of the Forester before the launch of its fully-redesigned version in the first half of the year.
Consolidated unit sales in Japan decreased 17.2% to 135,000 units, as sales of Impreza, Subaru XV and Levorg declined, offsetting strong demand for the fully-redesigned Forester launched in July 2018.
The company did offer forecasts for 2020, but is using new accounting rules this year, adopting International Financial Reporting Standards and dropping Japanese Generally Accepted Accounting Principles. The forecast is provided using the new rules.
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Consolidated global unit sales are projected to be 1,058,000 vehicles in prospect of growth mainly in the North American market. The company projects revenue of 3,310 billion yen, operating profit of 260 billion yen, profit before tax of 270 billion yen, and profit for the period attributable to owners of parent of 210 billion yen.
