By on May 12, 2019

Subaru may be getting too big for its britches. Despite seeming like it was positioned for nearly incalculable growth at the start of last year, the automaker’s latest financial report showed the period was actually plagued with problems. Over the full fiscal year, which ends on March 31st for Subaru, the company basically showed that its operating profit had been cut in half.

How could this have happened? Subaru’s commitment to all-wheel drive has given its sales a shot in the arm as the crossover craze has escalated and it has one of the best reputations in the business. Seriously, ask any automotive layperson what they think of the brand and they will almost always have something positive to say. However, for all of its presumed advantages, the company is reporting a 48.5-percent decline in operating profit (to 195.5 billion yen) and a 6.3-precent loss of global sales volume. 

Let’s start with sales. While the new Ascent did fairly well in North America, helping to further boost annual brand volume within the region, it’s far too big to support in all markets. European sales continued to struggle, with Subaru having continued difficulties maintaining its share of the market. In , Subaru also noted that consolidated unit sales in Japan decreased by 17.2 percent.

Part of this was down to idling production. Last January, Subaru suspended assembly at its Yajima facility over a suspected defect affecting the electric power steering unit of Impreza, Forester and Crosstrek models. What would have been a big issue for some automakers turned into a gargantuan one for Subaru because Yajima accounts for around 60 percent of  the company’s global production. When it idled the facility to deal with the affected models, it also had to halt assembly of everything else manufactured there for nearly two weeks.

Prior to that, Subaru was faulted with improper certification procedures and manipulating vehicle emissions data — resulting in another temporary closure while it conducted an internal investigation and a government-mandated recall totaling over 500,000 units. There were, of course, other huge recalls throughout the period, tempered by growing criticism from inside Japan that it was overworking employees to cope with rising global demand. Following a highly publicized workplace suicide, Subaru even acknowledged that some facilities in Japan had compelled thousands of employees to forgo millions of dollars in unpaid wages by working overtime off the clock.

As growing pains go, these have to be some of the worst we’ve ever heard of. Subaru is still a relatively small automaker as Japan’s 7th largest, but increasing demand (stemming primarily from the United States) has kicked it into overdrive. Unfortunately, in a bid to meet volume targets, quality has suffered — something the company now seems painfully aware of.

“Quality and production issues slowed output, which led to the drop in sales,” Chief Financial Officer Toshiaki Okada told following the report’s unintentional release.

From Reuters:

Domestic output will remain curbed during the first half of the current financial year while Subaru improves inspection and production processes, and then return to normal at “some” of its three production lines, said Chief Executive Tomomi Nakamura.

The report, officially released at 10:25 a.m. (0125 GMT) instead of the scheduled 1:00 p.m., showed an operating profit forecast for the year through March 2020 of 260 billion yen ($2.37 billion). That would be 33 [percent] higher than the year prior under international accounting standards adopted from this year.

Under the previous Japanese accounting standards, the forecast would be 250 billion yen, up 28 [percent], Subaru said.

 

[Image: Subaru]

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64 Comments on “Subaru Struggles: Annual Profit Effectively Halved Due to Quality Control Issues...”


  • avatar
    -Nate

    My how times have changed .

    -Nate

    • 0 avatar
      Detroit-X

      Or not.

      My multi-decade Subaru experience, new and used, has resulted in so many dumb and costly problems I’ll never EVER own one again. Thousands of dollars lost, to their mistakes. LEMON!

      From my experience, Subaru simply does NOT deserve their “quality reputation.”

      • 0 avatar
        -Nate

        Fair enough ~

        I’ve seen so many wretched GM products it’s a wonder I’m still a Chevrolet Fanboi but I am ~ if you’re an Enthusiast who likes a vehicle you’ll work it through to get it how you like .

        I’ve sold on many, _MANY_ old VW’s & GM products I bought thinking I could make them good but gave up on .

        -Nate

  • avatar
    TotalNonStopCars

    “Subaru even acknowledged that some facilities in Japan had compelled thousands of employees to forgo millions of dollars in unpaid wages by working overtime off the clock”

    That is shameful.

  • avatar
    TrailerTrash

    “As growing pains go, these have to be some of the worst we’ve ever heard of.”

    Dunno…Tesla seems to be doing better at this fail

  • avatar
    ToddAtlasF1

    Their marketing in the US is too effective for this to touch them here. Their defenders make people who still believe Trump colluded with the Russians look informed.

  • avatar

    “compelled thousands of employees to forgo millions of dollars in unpaid wages by working overtime off the clock”

    Do they even have unions? Inviting UAW to represent workers would solve all their problems.

  • avatar
    Dartdude

    What about the oil burning issues?

    • 0 avatar
      Dave M.

      Which engine and when?

      • 0 avatar
        slavuta

        Every engine, everyday

        • 0 avatar
          -Nate

          “Every engine, everyday”

          When you exaggerate like this you lose all credence….

          My son’s WRX wagon gets hammered daily and has occasionall issues, oil burning has never been one .

          I have no doubt that some Subarus burn too much oil but not every one, every day obviously .

          -Nate

          • 0 avatar
            Dave M.

            At 130k miles my Outback 2.5 shows no signs of oil or engine issues.

          • 0 avatar
            slavuta

            Nate,
            don’t start with me on Subaru. I’ve seen guys like you… I mean, talking like you, but then putting thousands into repairs and trading.

            I am in the same boat. That 2009 Highlander 2.7L went total Subaru on me. Long term disaster. Yea, it was nearly spotless for 9 years. But then, I learned that, apparently, all Toyota 4cyl engines of that era developed horrible oil consumption by design. On top of that transmission main seal leaked. At same time front strut leaked and I decided that I don’t want to deal with all these issues and traded in a Toyota! @ just 131K miles. This is J-vin model that was cared for. I have same year Mazda3 with more miles and 0 – zero problems.

          • 0 avatar
            RedRocket

            I think you might be what some message board folk call a “piston slappy” when it comes to defending Subaru engine issues. Always loved how appropriate that term was when it came to that brand.

          • 0 avatar
            -Nate

            I might well be piston slappy but I’m not wrong here ~ _YOU_ said “Every engine, everyday” knowing full well that’s a flat out lie because it’s physically impossible .

            Act like a child and you’ll get treated like one .

            I don’t own and never have, any Subarus so unlike you I have no dog in this hunt .

            -Nate

          • 0 avatar
            slavuta

            Just come down. I seriously don’t know 1 person in my circles, with Subaru, who either had not have to rebuild the engine/transmission or make extensive fixes to same. Actually, now I remember talking to my neighbor a month or so ago, he complained that his wife’s Forester was on 3rd engine. I didn’t pull his tongue. I was talking about how his XTerra does on the beach sand. But looks like that engine was all over his mind.

          • 0 avatar
            -Nate

            Fair enough but three engines ? .

            Wow .

            I wonder if the same engine was rebuilt or there were three exchange engines ~ an important detail as I’ve seen quite a few over my career that came new with a basic machining detail error making the engine impossible to properly rebuild .

            When a Customer has similar repeated failures it’s rarely the vehicles fault, that’s an obvious fact .

            Still not every one, every day but like my father who drove ’round corners in third gear as the poor engine shuddered, then told me I was a child who didn’t know anything when I gently tried to tell him that down shifting would prevent the constant 60,000 mile engine failures .

            -Nate

      • 0 avatar
        slavuta

        Dave,

        I swear, right in front of me, a co-worker… We talked about Subaru Issues and he was saying, “my Outback now had 135K miles – no issues”. I told him, “they will come”. Just like, less then a year later he arrives in as new car. I asked him, where is your Outback. He said, “apparently there were so many issues, I didn’t even know about. Engine needed $2K in repairs, transmission leaked.. I traded it.”

        Basically, yours “At 130k miles my Outback 2.5 shows no signs of oil or engine issues” – is a curse. See you soon.

        • 0 avatar
          87 Morgan

          Slavuta bummer on your yota coming unglued on you. I am a GM guy and would be p.o’d to the limit if one comes apart at 130k to point that i need to trade.

          As for Subaru not paying wages, that is not OK and needs to be investigated and rectified timely.

          • 0 avatar
            bullnuke

            Unpaid overtime is not a Subaru-only issue in Japan. The karoshi (death from overwork) incident from a few years ago of a white-collar worker and the failure to pay compensation for overtime due to employees not wanting to break company overtime budgets by reporting actual hours worked is and has been an issue with many operations in Japan. A quick Google-foo of “karoshi” will reveal this to be a widespread problem in that country with the Japanese government publicly listing more than 300 companies where dangerous and illegal overwork is an issue. I would be more than willing to wager that other Japanese auto manufacturers selling in the US have similar issues.

        • 0 avatar
          -Nate

          @Slavuta ;

          Yes, I -do- $pend more than my 35 year old beat to shit, 438,000 mile daily driver is worth and after twenty years I can’t afford to have the original paint job re sprayed but, it’s reliable and comfy so I think that like the Studebaker Guys say ” I’d rather fix than switch” .

          Many don’t get that Machines need periodic service and repair, just buying it doesn’t entitle you to endless mileage and only filling it up .

          IMO the short (80,000 mile then the pin is pulled) cam belt life in Subarus is a bad thing and should be a better factory part but I wonder if those who experience high oil consumption are also those who float the valves and make _every_single_shift_ a tranny slam/’power shift’, I see that constantly .

          Along with others who insist in short shifting and lugging the engine going ’round corners in third gear @ 25 MPH with the engine struggling @ 1,300 RPM then whine abut how the damn thing threw a rod bearing at only 85,000 miles…..

          I also agree that the Toyota V6’s sludging up and having engine failures is wrong, not just bad but to claim that a popular brand like Subaru is total junk is simply childish as well as incorrect .

          I’m a GM Fanboi but I have no problem with Ford products as I know many buy and like them just fine .

          -Nate

  • avatar
    Whatnext

    Subaru, so overrated.

  • avatar
    Unionwolf

    Imagine driving a Subaru

  • avatar
    SCE to AUX

    A relative’s 2014 Legacy with 45k miles just saw its exhaust system rust out – that’s the stuff of 1970s quality.

  • avatar
    Lie2me

    Wow, I never realized that Subaru had such a politically polarizing effect on people. So, no need for bumper stickers if it says “SUBARU” on the back and here I thought Subarus were strictly identifiable with sexual orientation

    • 0 avatar
      Dave M.

      Remember back in middle school when (insert name here) band came out and all the kids either became super fans or immediately dogged them because they weren’t this or that? The same rule applies to Subaru. Some people just can’t accept that a reasonably priced AWD line of vehicles has become popular or faddish or discovered or whatever. Like every auto manufacturer, Subaru has its strengths and weaknesses.

      At some point in time the fad will pass and the emo kids will move on to another target. It’s all good.

      • 0 avatar
        Lie2me

        I just thought Subaru had gotten past the “liberal lesbian” connection by now, but according to the comments not really. My biggest surprise is at the amount of people in my small mid-western town who are apparently leading rather interesting double lives

        • 0 avatar
          golden2husky

          Lie2me – The “liberal Lesbian” Subaru driver certainly exists, but the brand has become a mainstream commodity to everybody and has moved way beyond that particular market. Just as most Prius drivers are not “tree huggers”; they just want a reliable ride that saves them money on fuel and gets them in the HOV lanes. The negativity here comes from the “god, guns, guts” right wingnuts of which there are plenty on this site.

    • 0 avatar
      NormSV650

      Or that reference was fueled every couple of years by this site.

      “…After identifying core groups interested in its cars, Subaru found something curious: lesbians, for whatever reason, loved Subaru. For our edutainment, Priceonomics has detailed the history of Subaru loving those lesbians right back.

      Aside from the internet trope that dictates at least one Mustang driver must crash at every Cars and Coffee event, there can’t be a much stronger automotive stereotype than lesbians loving Subarus. It’s a stereotype that may or may not have cajoled TTAC’s founder into comparing the grille of the B9 Tribeca with a certain part of the female anatomy…”

      http://paardensex.info/2016/05/priceonomics-details-subarus-lesbian-marketing-love-affair/

      • 0 avatar
        SSJeep

        This has become more of a marketing issue than Subaru thought. I have suggested the Ascent to several people who needed a 3-row SUV and their response was along the lines of “Im not a lesbian, why would I look at a Subaru”. I would drive one personally but it seems like more people – regardless of political affiliation – try to associate a Subaru with girls who like girls.

        The conundrum that this presents is that Subarus target category is maybe 1% of the US population.

        • 0 avatar
          FreedMike

          Actually, I bet that if you drilled down to the ‘core’ Subaru buyer, you’d get someone who is DEEP into camping/biking/skiing type activities, and plenty of lesbians have zero interest in that kind of stuff.

          • 0 avatar
            Lie2me

            Here in small town mid-west it’s mostly young families and older folks who drive Subarus, none of which fit the stereotype

  • avatar
    conundrum

    The way Subaru treated imported temporary workers was arguably worse than the ridiculously loyal regular employees working unpaid overtime. That was documented by Reuters.

    https://www.reuters.com/investigates/special-report/japan-subaru/

    In the “the world everywhere is exactly the same as what passes by my office window every day” stakes, it’s worth noting that Subaru is only 5/8 the size of Mazda, which people round here have dying off from being too small, when they make 1.6 million cars a year. Mazda may be unpopular in the US, but obviously not everywhere.

    However, even with this profit tumble, at $1.8 billion it dwarfs Mazda’s $750 million. I guess better materials do cost more.

  • avatar
    jimmy2x

    This site would be a lot better if people would stop all the political dick-waving.

    • 0 avatar
      -Nate

      Good luck with that .

      -Nate

      • 0 avatar
        SSJeep

        You really dont need to add the -Nate at the end if your username is -Nate. Just saying. We know who made the post.

        -SSJeep

        • 0 avatar
          -Nate

          Quite simply :

          I’m not a keyboard coward who hides behind a cute moniker and / or lies .

          Love or hate me I stick to the truth even though it’s hard because many are deathly afraid having no experience anywhere but here in the good old U.S. of A. and don’t grasp that lying or pretending to believe in obvious lies doesn’t buttress your position , it makes you look weak and foolish .

          -Nate

      • 0 avatar
        SSJeep

        You really dont need to add the -Nate at the end if your username is -Nate. Just saying. We know who made the post.

        SSJeep

    • 0 avatar
      FreedMike

      Well, there’s political dick-waving on political articles, and then there’s the political dick-waving on non-political articles. I mean, seriously, how does an article about Subaru sales turn into “liberals suck” and “Trump sucks”? Some folks just need to chill the f**k out.

  • avatar
    bullnuke

    As with all of the click-bait headlines on this site, I did a bit of searching to attempt to verify Mr. Posky’s reporting. The takeaway is that Subaru shutdown a plant to fix problems with a component prior to marketing vehicles (unlike other manufacturers who gladly sell PowerShift trannies, vehicles with oil-diluting engines, as well as others with their problems which get pushed out to the customers) and the effect of the shutdown caused lower than expected production volumes. This shutdown, as well as contracting JDM/non-US sales volumes had a negative effect on the bottom line last quarter. The other aged information inserted in this article was to generate outrage from the B&B and all the resulting educational and informative banter of the previous posts, some quite comedic.

    • 0 avatar
      SSJeep

      Agreed – at least they shut down the plants for retooling rather than producing frames with bad welds, engines that would grenade in 50000 miles, etc, similar to other manufacturers. Taking ownership is the right thing to do, and Subaru is doing exactly that.

    • 0 avatar
      SSJeep

      Agreed – at least they shut down the plants for retooling rather than producing frames with bad welds, engines that would grenade in 50000 miles, etc, similar to other manufacturers. Taking ownership is the right thing to do, and Subaru is doing exactly that.

  • avatar
    Felix Hoenikker

    In my own local experience, the two brands with the most serious long term durability problems are VW and Subaru. I’ve never owned either since I like to buy new and hold for a long time. So long term durability is a big issue for me and even a hint of what I consider costly premature failures is a deal breaker.
    That said, I hope that both companies can put their less than stellar reputations behind them. The best way to do this for me would be a 10 yr/ 150,000 mile zero deductible power train and electronics warranty.


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