Subaru profit falls 42% on higher warranty costs

TOKYO -- Subaru reported a 42 percent plunge in operating profit in the latest quarter amid falling wholesale volume, surging warranty outlays and a big hit from foreign exchange rates. Operating profit dropped to 57.8 billion yen ($530 million) in the fiscal third quarter ended Dec. 31, the automaker said on Wednesday in its earnings report. Net income declined 42 percent to 43.4 billion yen ($398 million). Revenue fell 2.3 percent to 878.9 billion yen ($8.06 billion) in the period, as worldwide wholesale volume fell 5.9 percent to 267,200 million units. In announcing the results, CFO Toshiaki Okada said higher costs to cover recalls, including a callback to fix coil springs, took a 29.3-billion-yen ($268.7 million) bite out of quarterly results. Unfavorable foreign exchange rates delivered another 13-billion-yen ($119.2 million) blow. The parent company's profit woes contrast with the seemingly invincible face of Subaru in the United States, the Japanese automaker's biggest and most important market. Subaru's U.S. sales climbed 2.9 percent to 700,117 in 2019, and the company forecasts a 4 percent increase to 725,000 units in 2020. Attaining this year's target would represent a remarkable 12th year in a row of record U.S. sales for the all-wheel-drive niche player. But even as U.S. retail sales increased, U.S. wholesale volume declined 5.2 percent to 183,700 vehicles in the three months to Dec. 31.

Subaru profit falls 42% on higher warranty costs

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