Subaru's Earnings Plummet

Recall costs and slumping sales in the U.S. slashed Subaru Corp.’s net earnings in its July-September 97% to 3 billion yen ($26 million).

The company’s operating income dropped 13% to 93 billion yen ($813 million). Revenue dipped 3% to 832 billion yen ($7.3 billion) as unit sales declined 3% to 259,900 vehicles.

Subaru blamed the declines on a 7% drop in sales in North America, a region that generates 70% of the company’s global volume, and the rising cost of retail incentives. A one-time charge of 82 billion yen ($712 million) for recalls to replace explosion-prone Takata Corp. airbag inflators also contributed.

The carmaker lowered its outlook for the full fiscal year ending next March 31. Subaru previously anticipated a 4% gain in unit sales worldwide. Now it predicts volume will be virtually flat at 1.07 million units. And net income is expected to plunge 27% to 207 billion yen ($1.8 billion), more than three times greater shrinkage than previously expected.

Subaru also faces as much as 10 billion yen ($88 million) in costs to re-inspect cars in Japan that had been improperly certified for domestic sale.