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Subaru factory woes force profit forecast cut

Outback wagon maker fails to reap benefit of Toyota tie-up

Subaru's sole Japanese plant, in Gunma Prefecture, was forced to halt production for two weeks over possible defects in power steering units. (Photo by Naoki Tsukamoto)

TOKYO -- Subaru on Thursday cut its profit forecast by 16% after a series of problems at its domestic factory. 

The company projected a net profit of 140 billion yen ($1.28 billion) for the year ending March 31, down from the old forecast of 167 billion yen and 36% lower than the previous year.

As the auto industry faces a once-in-a-century shift, the manufacturer of the Outback station wagon has struggled to turn its partnership with Toyota Motor into a much-needed driver of profits and new technology.

The tie-up dates back to 2005, when Toyota agreed to buy shares in what was then Fuji Heavy Industries from General Motors. The partnership was supposed to help the midsize automaker, since renamed Subaru, keep up with cutting-edge trends it could not afford to on its own. But it has not generated much synergies since production of the jointly developed Toyota 86 and Subaru BRZ sports cars began in 2012.

Subaru's operating profit projection was cut to 185 billion yen from 220 billion yen, with sales seen at 3.12 trillion yen, down from 3.21 trillion yen. The company blamed the downgrade on factors including a roughly two-week domestic production halt last month over possible defects in power steering units.

Output resumed Jan. 28 at the company's sole Japanese factory, located in Gunma Prefecture north of Tokyo.

The facility has been plagued with other problems. The automaker last year admitted fabricating emissions and fuel economy data. Unqualified personnel also carried out inspections because of worker shortages and cost-cutting pressures.

The automaker aims "to bring production back to full capacity by March 2019," Executive Vice President Toshiaki Okada told reporters Thursday.

A quick recovery would be key to advancing negotiations with Toyota on future projects -- a must for Subaru, which sells only about 10% as many autos as its partner. Okada said that the alliance "is extremely important in today's age" but that he cannot discuss details "at this time."

Fellow midsize automaker Mazda Motor has been leveraging its own partnership with Toyota into new opportunities. The two companies are bringing a joint plant online in the U.S. in 2021 and have launched a joint venture with Denso to co-develop basic structural technologies for electric vehicles.

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