From http://quote.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=7270:JP&sid=a6k3i1FCXbzA: Fuji Heavy Profit Surges as One-Time Charges Decline

By Naoko Fujimura

Feb. 2 (Bloomberg) -- Fuji Heavy Industries Ltd., the maker of Subaru cars, almost doubled its nine-month profit as it spent less on job cuts.

Net income rose 93 percent to 24.7 billion yen ($205 million), or 34.38 yen a share, for the nine months ended Dec. 31, from 12.8 billion yen, or 16.85 yen a share, a year earlier, Fuji Heavy said in a statement today. The Tokyo-based company had a one-time charge of 17 billion yen the previous year on costs that included job cuts and canceling new vehicles. Sales rose 1.9 percent to 1.06 trillion yen, from 1.04 trillion yen.

Fuji Heavy, 8.7 percent owned by Toyota Motor Corp., spent almost 8 billion yen in the previous nine months cutting 700 jobs to shave 7 billion yen in annual costs. The company also took a one-time charge of 5.7 billion yen to cancel a vehicle it was developing with General Motors Corp.'s Saab unit.

Fuji Heavy expects full-year net income to almost double to 30 billion yen from 15.6 billion yen, unchanged from its previous forecast in May. That will be the first annual profit increase in three years.

Last year's profit was squeezed by total one-time charges of 27.3 billion yen. Sales will probably rise 1.6 percent to 1.5 trillion yen.

Nine-month operating profit, or sales minus the cost of goods sold and selling, general and administrative expenses, fell 4.8 percent to 35.8 billion yen. The company said higher incentives in the U.S. and increased research costs trimmed operating profit.

Weaker Yen

Selling less profitable models such as Stella minicars than Legacy station wagons and Forester sport-utility vehicles cut profit by 16.1 billion yen, the company said. Spending on research and development also reduced profit by 4.2 billion yen.

Fuji Heavy based its nine-month earnings on an exchange rate of 116 yen to the dollar, compared with 111 yen a year earlier. The weaker yen increased Fuji Heavy's operating profit by 11.1 billion yen, the company said.

Global sales fell 0.6 percent to 406,000 units in the nine- month period. The company's overseas sales increased 0.6 percent to 246,000 units, while domestic sales declined 2.3 percent to 160,000.A one-page summary of FHI's 3rd quarter financial results can be found at http://ir.fhi.co.jp/english/news/pdf/2007_02_02_con.pdf.

hmm... so massive profit increase, BUT overall sales is dropping.. i dont think thats good...hopefully the 08s will help out significantly

Subaru has huge margins built into their cars. Think about it, at 200,000-ish units sold in the US it is turning a profit... and a pretty good one. I see it as a catch-22, if SOA drops prices (and margins) is may sell a lot more cars... or screw itself in the process. If it stays at its current pricepoint it risks pricing itself out of the market as the competition catches up w/ more AWD offerings.

More details at:
http://ir.fhi.co.jp/english/finance/pdf/fr/2007/2007_3qf_nc.pdf

Subaru has huge margins built into their cars. Think about it, at 200,000-ish units sold in the US it is turning a profit... and a pretty good one.It appears that SOA had an $8 million operating loss last year.

;16907202']From http://quote.bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=7270:JP&sid=a6k3i1FCXbzA: A one-page summary of FHI's 3rd quarter financial results can be found at http://ir.fhi.co.jp/english/news/pdf/2007_02_02_con.pdf.



Fuji Heavy Profit Surges as One-Time Charges Decline

By Naoko Fujimura

Feb. 2 (Bloomberg) -- Fuji Heavy Industries Ltd., the maker of Subaru cars, almost doubled its nine-month profit as it spent less on job cuts.

Net income rose 93 percent to 24.7 billion yen ($205 million), or 34.38 yen a share, for the nine months ended Dec. 31, from 12.8 billion yen, or 16.85 yen a share, a year earlier, Fuji Heavy said in a statement today. The Tokyo-based company had a one-time charge of 17 billion yen the previous year on costs that included job cuts and canceling new vehicles. Sales rose 1.9 percent to 1.06 trillion yen, from 1.04 trillion yen.

Fuji Heavy, 8.7 percent owned by Toyota Motor Corp., spent almost 8 billion yen in the previous nine months cutting 700 jobs to shave 7 billion yen in annual costs. The company also took a one-time charge of 5.7 billion yen to cancel a vehicle it was developing with General Motors Corp.'s Saab unit.

Fuji Heavy expects full-year net income to almost double to 30 billion yen from 15.6 billion yen, unchanged from its previous forecast in May. That will be the first annual profit increase in three years.

Last year's profit was squeezed by total one-time charges of 27.3 billion yen. Sales will probably rise 1.6 percent to 1.5 trillion yen.

Nine-month operating profit, or sales minus the cost of goods sold and selling, general and administrative expenses, fell 4.8 percent to 35.8 billion yen. The company said higher incentives in the U.S. and increased research costs trimmed operating profit.

Weaker Yen

Selling less profitable models such as Stella minicars than Legacy station wagons and Forester sport-utility vehicles cut profit by 16.1 billion yen, the company said. Spending on research and development also reduced profit by 4.2 billion yen.

Fuji Heavy based its nine-month earnings on an exchange rate of 116 yen to the dollar, compared with 111 yen a year earlier. The weaker yen increased Fuji Heavy's operating profit by 11.1 billion yen, the company said.

Global sales fell 0.6 percent to 406,000 units in the nine- month period. The company's overseas sales increased 0.6 percent to 246,000 units, while domestic sales declined 2.3 percent to 160,000.




Operating profit is the key indicator that Japanese use in valuations of a company. The incentive war in the US is hurting FHI's profitability.

Subaru has huge margins built into their cars. Think about it, at 200,000-ish units sold in the US it is turning a profit... and a pretty good one. I see it as a catch-22, if SOA drops prices (and margins) is may sell a lot more cars... or screw itself in the process. If it stays at its current pricepoint it risks pricing itself out of the market as the competition catches up w/ more AWD offerings.

Subaru has one of the WORST profit margins in the industry. Subaru's supply chain costs are extremely high based on Subaru's tiny volume in relation to the industry. Think how easy it is for Honda to get a good volume price on door handles for 300,000 civics vs. Subaru not being able buy as cheaply or spread the price of having 3 different door handles for 100,000 less cars. All of those price discrepancies for all of the parts of the vehicle add up. Subaru is at an odd spot because it's not a volume brand to where it can spread its costs out, and it's not a luxury brand to where it recoups its cost with the requisite mark-up. It also is spending money out of it's own bank and doesn't have someone else's pockets to dip into. Building equipping everything its own quality AWD systems vs. sourching Haldex or building a psuedo-AWD system is another huge cost issue. This story can go on and on.


Cliff Notes... FHI's Vehicle Margins SLIM

Operating profit is the key indicator that Japanese use in valuations of a company. The incentive war in the US is hurting FHI's profitability.



Subaru has one of the WORST profit margins in the industry. Subaru's supply chain costs are extremely high based on Subaru's tiny volume in relation to the industry. Think how easy it is for Honda to get a good volume price on door handles for 300,000 civics vs. Subaru not being able buy as cheaply or spread the price of having 3 different door handles for 100,000 less cars. All of those price discrepancies for all of the parts of the vehicle add up. Subaru is at an odd spot because it's not a volume brand to where it can spread its costs out, and it's not a luxury brand to where it recoups its cost with the requisite mark-up. It also is spending money out of it's own bank and doesn't have someone else's pockets to dip into. Building equipping everything its own quality AWD systems vs. sourching Haldex or building a psuedo-AWD system is another huge cost issue. This story can go on and on.


Cliff Notes... FHI's Vehicle Margins SLIM

this makes sense, now wonder the basic body parts for these things are so damn expensive.. hopefully the relationship with Toyota will help reduce costs by buying parts in bigger bulks.. the "new key" in another thread looks like its a toyota key, well thats a good place to start by reducing manufacturing costs.. hopefully the next impreza will share parts with the legacy reducing costs even further, then the next forester to take parts from the impreza which will be from the legacy to FURTHER reduce costs :D

;16907545']It appears that SOA had an $8 million operating loss last year.

I stand corrected. I've been under the assumption that although our expenses are relatively high our actual margins were good (i.e. SOA is charging too much for their cars ;) ).

with all the extra money they're makeing, don't you think they can put some more paint on the cars?

with all the extra money they're makeing, don't you think they can put some more paint on the cars?

SOA's not making money. It's bleeding red ink. SOA sold it's sold to the devil to reach 200,000 cars. Incentives and Fleet have battered the balance sheet.

SOA's not making money. It's bleeding red ink. SOA sold it's sold to the devil to reach 200,000 cars. Incentives and Fleet have battered the balance sheet.SOA actually managed to reduce its operating loss last year to $8 million, down from $19 million the year earlier.

;16913105']SOA actually managed to reduce its operating loss last year to $8 million, down from $19 million the year earlier.

I noticed that too. I really am amazed that SOA can't get the costs down further. The incentive game doesn't work, pricing to the market does.

with all the extra money they're makeing, don't you think they can put some more paint on the cars?

The paint is fine. It's the primer that sucks, the paint doesn't stick to it very well. When a stone hits, the panel deforms a bit, the paint separates from the primer, and the chip of paint breaks loose.

Making the paint film thicker would actually make the problem worse - it would be even less flexible.

Good job FHI. In a competetive market, there are LOTS of manufacturers loosing Billions/facing bankruptcy (FORD, GM, thier subsidiaries)

Seems they are doing well for their size and turning a modest profit.

Operating profit is the key indicator that Japanese use in valuations of a company. The incentive war in the US is hurting FHI's profitability.



Subaru has one of the WORST profit margins in the industry. Subaru's supply chain costs are extremely high based on Subaru's tiny volume in relation to the industry. Think how easy it is for Honda to get a good volume price on door handles for 300,000 civics vs. Subaru not being able buy as cheaply or spread the price of having 3 different door handles for 100,000 less cars. All of those price discrepancies for all of the parts of the vehicle add up. Subaru is at an odd spot because it's not a volume brand to where it can spread its costs out, and it's not a luxury brand to where it recoups its cost with the requisite mark-up. It also is spending money out of it's own bank and doesn't have someone else's pockets to dip into. Building equipping everything its own quality AWD systems vs. sourching Haldex or building a psuedo-AWD system is another huge cost issue. This story can go on and on.


Cliff Notes... FHI's Vehicle Margins SLIM


Subaru shares a lot of its parts with other car makers. Some of the knobs for instance are from Nissan.

Finally utilizing all of their production capacity at SIA should help bump profits quite a bit, I imagine.

Subaru shares a lot of its parts with other car makers. Some of the knobs for instance are from Nissan.

I don't think that means they purchase in bulk with Nissan... maybe they just happen to buy parts from the same knob manufacturer. If so, Nissan would certainly pay a lot less for the same part due to their much higher volumes. Anyone with more Subaru manufacturing knowledge care to chime in on this?

;16913105']SOA actually managed to reduce its operating loss last year to $8 million, down from $19 million the year earlier.

Fewer one time charges

I don't think that means they purchase in bulk with Nissan... maybe they just happen to buy parts from the same knob manufacturer. If so, Nissan would certainly pay a lot less for the same part due to their much higher volumes. Anyone with more Subaru manufacturing knowledge care to chime in on this?

Sometimes the parts are bought from the other manufacturer (not at cost), sometimes with. Those parts still are nowhere from adding up to extra costs from unique parts that could be bought in someone else's larger supply chain

Awesome. Start bringing more STi variants.

I don't think that means they purchase in bulk with Nissan... maybe they just happen to buy parts from the same knob manufacturer. If so, Nissan would certainly pay a lot less for the same part due to their much higher volumes. Anyone with more Subaru manufacturing knowledge care to chime in on this?

Once the cost of tooling is covered, the prices drop dramatically. After the tooling is initially covered, the manufacturer can drop prices to where they are just paying for materials, labor, and overhead.

I work in manufacturing. If we need something like a rubber cap, we always search for something already out there before hiring someone to make a custom one. The cost of a rubber cap can be as low as a $.005/part if you can find something already in production. Getting something made up for you can be upwards of $.15/part until the tooling costs are covered. When you are producing 250,000 parts/year, that is a HUGE difference. It is insane how packaging changes your profit margin in the long run.

I'd say that is why you saw Apple switch to the narrow boxes on the more recent iPods. They probably saved $.30/iPod. When you multiply that by the hundreds of thousands they sell a year, it really adds up. The same goes for dropping the firewire cable as an included accessory. Owning a mac, the firewire cable is great, but when 75% or more iPod owners are windows users, it is generally a wasted accessory and lost profit.

~~Quentin

The paint is fine. It's the primer that sucks, the paint doesn't stick to it very well. When a stone hits, the panel deforms a bit, the paint separates from the primer, and the chip of paint breaks loose.

Making the paint film thicker would actually make the problem worse - it would be even less flexible.

Good info, I didn't know that.

Must be because they're selling less Legacy wagons. ;)

I'd say that is why you saw Apple switch to the narrow boxes on the more recent iPods. They probably saved $.30/iPod. When you multiply that by the tens of millions they sell a quarter, it really adds up.

Fixed. They sold over 21 million just in Oct-Dec (http://www.macrumors.com/2007/01/17/apple-posts-1-billion-in-profit-1q-2007-and-financial-call-notes/). I guess it also helps that they stopped bundling the dock, belt clip case, and remote too. That really just adds to your point.