http://www.reuters.com/newsArticle.j...toryID=7619868

RPT-UPDATE 2-Subaru Cuts 04/05 Forecast as Product Mix Worsens
Mon Feb 14, 2005 08:06 AM ET
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By Chang-Ran Kim, Asia auto correspondent

TOKYO (Reuters) - Subaru-maker Fuji Heavy Industries Ltd. (7270.T: Quote, Profile, Research) posted a 26 percent drop in nine-month operating profit on Monday and slashed its full-year forecast citing a worsening product mix and higher marketing and other sales costs.

Subaru, held one-fifth by General Motors Corp. (GM.N: Quote, Profile, Research) , had been banking on the remodeled flagship Legacy and other new cars to improve its fortunes, but faced declining profitability as more customers opted for cheaper variations of its products.

"Sales of (high-margin) turbo engine versions of the Legacy were lower, and that hit profits," Executive Vice President Shunsuke Takagi told a news conference.

For the year to March 31, Japan's niche maker of all-wheel-drive off-road vehicles now forecasts an operating profit of 40 billion yen ($379.5 million) instead of 45 billion yen, expecting a deterioration in the model mix to shave an extra 3 billion yen.

It will also shell out 2.1 billion yen more on TV commercials and other sales-related costs than previously expected, mainly in the domestic market.

At the new forecast, Subaru's operating profit would be 20.5 percent below last year's 50.3 billion yen.

Net profit is now projected at 28 billion yen instead of 32 billion, even though its revenue forecast was untouched at 1.45 trillion yen as sales volume came roughly in line with expectations.

For the nine months to Dec. 31, operating profit was 26.5 billion yen, dented by a nine-yen fall in the dollar to 109 yen. A weaker dollar makes exports from Japan more expensive and reduces the value of dollar-based earnings when converted into yen.

Among Japanese car makers, Subaru is especially vulnerable to a weak dollar since North America accounts for over a third of its sales.

Net profit for the first three quarters fell 28 percent to 20.72 billion yen due to difficult comparisons from the year before, when the company booked a special gain on stock sales.

Revenue rose 2.1 percent to 1.05 trillion yen as volumes grew in every major region

SALES INCENTIVES TO RISE

Subaru said, however, that sales of the Legacy had run its course in Japan, prompting it to lower its full business-year domestic sales target by 2,000 units to 263,000 vehicles.

In the United States, on the other hand, Takagi said Subaru expected to enjoy a continued rise in sales, although he warned that spending on discounts and other consumer incentives would likely rise on tough competition and higher U.S. interest rates.

Subaru's U.S. sales have risen by double digits for four of the last five months, with a slowdown last month to a seasonally adjusted 3 percent.

Takagi called January an aberration caused by the snowstorms in the U.S. Northeast, where its all-wheel-drive cars are popular, and said he expected brisk demand to resume this month.

"Sales in the first 10 days of February were up around 20 percent, and they should remain strong for a while," he said.

Subaru is also counting on the B9 Tribeca high-end crossover vehicle -- its first product in the premium segment -- to lift sales when it hits showrooms this summer in the United States.

Globally, Subaru tweaked its sales forecast up by 1,000 units to 589,000 vehicles, helped by better sales in markets outside Japan and North America.

Fuji Heavy shares sank 11.2 percent during the nine months, underperforming a 6.1 percent rise in Tokyo's transport sector subindex and a 2.5 percent fall in the broader TOPIX index.

Ahead of the results, the shares ended up 3.2 percent on the day at 516 yen against a 0.19 percent rise in the subindex.

($1=105.40 yen)

 

Stupid Subaru. And rumor has it the '06 Forester will have a 6-speed.

Oh, wrong forum Mike?

 

I figured you and Marshall would be very intersted in this. I think some of it is price, I don't think many people want to pay over 35k for a Suburu, that is when badge houding gets in.....

 

There is no Subaru product that I know of currently on sale in the American market that goes for more than 35K......though loaded Outback L.L. Beans, VDC's, and some STi's can run 32-33K. The B9K / Tribeca MAY run 35K and up....we'll have to wait and see how SOA prices it .
The slow sales figures of the Turbo Legacy / Outbacks and Foresters don't surprise me. I have a high regard for both versions....Turbo and non-turbo....but I've said repeatedly that unless you want real kick-in-the-pants acceleration, the non-turbos and the standard 2.5L flat-four, I thought, were a better value dollar-for-dollar. Apparantly many of the people actually buying these vehicles agree.....and outside of the younger WRX / STi customers ( the same people who are also buying Evos), most people don't really associate Subaru with high-performance but with reliable, inexpensive, well-built, all-weather vehicles.

 

Its in Japan!

In the U.S they are doing quite well...