Wednesday, 23 May 2018

Profit drop in once reliable N.A. drags down Subaru

Yoshinaga: It will get tougher.

TOKYO — North America, long the earnings engine for Subaru Corp., turned into a drag on profits amid spiraling incentives due to increased competition in the crossover segment.

Subaru is still on pace for its 10th straight year of record U.S. sales. But the company is spending more to move the metal. Those higher outlays hurt parent company profits, which declined for the second straight year, mostly on tumbling results in North America.

Subaru warned that incentive spending will only get worse.

Its per-vehicle spiffs averaged $2,000 in the fiscal year that ended March 31, up $550 over the previous year. That should climb to $2,200 in the current fiscal year, said Toshiaki Okada, corporate executive vice president. “We plan to raise the incentive on concerns that the U.S. interest rate will rise,” he said.

Selling expenses should taper off in the second half of this year, he added, after Subaru introduces the Ascent large crossover and the fifth-generation Forester crossover. The Ascent, which just entered production in Indiana, takes Subaru into a segment where it currently doesn’t compete.

CEO Yasuyuki Yoshinaga said competition is hotter than expected in the company’s go-to segment of crossovers, a niche the all-wheel-drive specialist once helped pioneer.

“The market is moving in the direction we anticipated,” he said. “But we didn’t expect there to be so many models as now, so the competition is heating up. Looking ahead, the situation will become tougher.”



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