Two GM group Japanese car makers reported contrasting financial results for the first half, an outcome that underscored the popularity of cheaper cars amid the global economic slowdown, Reuters reported.
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According to Reuters, Subaru-maker Fuji Heavy Industries, known for four-wheel drive models, said on Friday that its operating profit for April-September slid 16% to 36.95 billion yen ($306.8 million) as sales fell 1.7% to 648.47 billion.
In contrast, Reuters noted, Suzuki Motor, Japan’s biggest minivehicle maker, saw its operating profit rise 21% from the same period last year to a record 37.85 billion yen on a 19% jump in sales to 1.03 trillion yen.
Reuters said both car makers said they suffered from weak demand at home but Suzuki nonetheless managed to boost its profit in every region, including Japan, as well as in every product segment.
“We have not changed our full-year forecasts, but we will do our utmost to exceed those numbers despite the difficult business environment,” Suzuki’s senior managing director, Katsuhiro Yokota, told a news conference, Reuters said.
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Suzuki, whose cheap, 660cc minivehicles make up 90% of its car sales, expects sales to surge 19% and operating profit to jump 20% for the full year to March to record levels, Reuters reported.
According to Reuters, Fuji Heavy, which introduced America’s first mass-market four-wheel-drive car in 1975, revised its full-year sales forecast down 1.4% from a May projection, citing worsening business conditions at home.
“We expect domestic car sales to be very weak,” chief financial officer Hiroshi Suzuki told Reuters.
But, Reuters added, the Subaru maker raised its operating and net profit forecasts due to expectations of bigger cost cuts and lower-than-expected outlays for research and development.
Reuters said both companies, each owned 20% by General Motors, gained from a softer yen in the first half, but expect currencies to play a neutral or negative role for the full year.
They said they would aim to further reduce procurement, development and other costs through close cooperation with GM, Reuters reported.
Reuters said that Suzuki Motor’s good fortunes can be attributed largely to a change in Japanese consumers’ taste for cars in the shaky economic environment.
Benefiting from tax breaks, minivehicles have become the second car for many Japanese families and now account for one-third of the nation’s new vehicle sales, Reuters said.
According to Reuters, Suzuki has also expanded its business by making cars for other brands, supplying minicars to Mazda, small cars to GM and Fuji Heavy and, recently, minivehicles to Nissan.
That agreement with Nissan, whose sales of the Moco minicar model have far exceeded expectations, has helped its main factory reach full capacity, Reuters noted.
According to Reuters, Suzuku in June raised its stake in top Indian carmaker Maruti Udyog to 54.2% from 50 %, meaning it can now include revenues from the unit in its consolidated earnings.
Reuters said Suzuki also announced on Friday a plan to raise its stake in its Indonesian production and sales unit to 90% from 49%.
And in Europe, the car maker plans to invest more into its production facilities in Hungary, where it led the market for new cars with a 19.5% share last year, Reuters added.
But, Reuters said, the battle for Fuji Heavyis all uphill.
At home in Japan, according to Reuters, the entry of new players into the popular minivehicle segment has been detrimental and Subaru’s sales of the cars fell 11% in the six months to September.
“In the first half, rival companies rushed to put out new models and this dealt us a heavy blow,” Fuji Heavy’s Suzuki told Reuters.
With demand sluggish and competition heightening at home, Fuji Heavy is placing all its hopes overseas, Reuters said.
According to the news agency, for the full year, Fuji Heavy expects sales volume in Japan to fall 5.9% short of last year’s, while overseas sales are expected to expand 6.4%.
But, Reuters said, sales in the United States so far this year are down 1.7%, although Fuji Heavy expects to get a boost in the second half from new models, including the Subaru Baja [a pickup-style SUV based on the Outback wagon].
Reuters said that motor industry analysts note that the heavy dependence on overseas markets comes with its share of dangers.
“The only production site (overseas) is SIA (Subaru-Isuzu Automotive) in the US, and this strategy also comes with forex risk,” Goldman Sachs wrote in a report, according to Reuters.
