TOKYO -- Operating profit at Subaru plunged by almost half in the latest fiscal year amid a fusillade of falling wholesale volume, higher incentives and surging warranty outlays.
Subaru's operating profit tumbled 49 percent to 195.53 billion yen ($1.76 billion) in the full fiscal year ended March 31, the automaker said on Friday in its earnings report.
Net income dropped 33 percent to 147.81 billion yen ($1.33 billion) in the 12 months.
Revenue declined 2.2 percent to 3.16 trillion yen ($28.51 billion) in the just-ended fiscal year, as worldwide wholesale volume slid 6.3 percent to 1.0 million units.
Subaru's results were undercut by a rash of quality problems, mostly confined to Japan, that forced costly recalls and a temporary production shutdown.
In January, Subaru lost almost 10 days of output as it halted output at its sole assembly plant in Japan. Lines were stopped to address a problem with electric power-steering units in the Forester and Crosstrek crossovers as well as the Impreza small car. That shutdown affected all models made in Japan, and Subaru suffered some 30,000 units of lost output.
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 miles-to-empty display may erroneously indicate that more driving range is available than actually remains.
Just before that came a global recall of 411,000 vehicles to fix faulty valve springs that can cause engines to stall. And that came on the heels of Subaru's recalling a half-million vehicles in Japan to address a problem of cheating on final vehicle inspections.
In the July-September fiscal second quarter, Subaru booked its first quarterly loss since early 2010, when it was still digging out of the global financial crisis.
The parent company's woes contrast with the seemingly invincible face of Subaru in the United States, the Japanese automaker's biggest and most important market.
In the U.S., Subaru expects to cruise to an 11th straight year of record sales in 2019. Its U.S. retail sales climbed 7.7 percent in April, for a remarkable 89th straight month of sales gains.
But even as U.S. retail sales increased, North American regional wholesale volume declined 1.5 percent to 717,000 vehicles in the 12 months to March 31. European wholesale fell 16 percent to 40,000 vehicles, while volume in the home market of Japan slid 17.2 percent to 135,000.
Subaru books parent-company earnings from its wholesale deliveries.
Rising incentives have also been denting Subaru's profits.
In the January-March period, average spiff spending by Subaru of America rose 14 percent, while overall industry outlays actually decreased 4.6 percent, according to figures from Autodata. But Subaru's $1,424 cost per unit was still far below the industry average of $3,574.
Subaru forecast that operating profit will increase to 260 billion yen ($2.35 billion) in the current fiscal year ending March 31, 2020, while net advances to 210 billion yen ($1.89 billion).
Subaru is switching accounting rules this year, by adopting International Financial Reporting Standards and dropping Japanese Generally Accepted Accounting Principles.
Subaru said global wholesale volume should increase 5.6 percent to 1.06 million vehicles. North American sales, it predicted, will rebound 5.1 percent to 753,000 in the current fiscal year.
