TOKYO -- Subaru maker Fuji Heavy Industries expects a ninth straight year of record U.S. sales in the year ending March 2018, with its plant operation rate exceeding capacity on the back of strong performance.
The company is confident about achieving continued growth in the U.S., where Fuji Heavy earns about 80% of its consolidated operating profit, Chief Financial Officer Mitsuru Takahashi told The Nikkei. As for President-elect Donald Trump's protectionist stances, Takahashi warned that "extreme policy changes could pose a risk for its business."
For fiscal 2016, North American sales are seen rising 14% on the year to 660,000 units, helped by 60 straight months of sales increases. Orders have come in at a rapid clip at American production hub Subaru of Indiana Automotive (SIA), which began mass production of the new Impreza model in November. Overall demand in the U.S. new-car market has peaked, said Takahashi, but with 75% of the Subaru lineup comprised of sport utility vehicles, the company can count on sustained expansion in a country that loves big cars.
Production capacity at SIA will double last spring's level by the end of the year, reaching roughly 400,000 vehicles per year. The plant will gradually move toward full utilization, producing an extra 60,000 to 80,000 units next fiscal year, according to Takahashi.
Fuji Heavy boasts high efficiency, with strong facility utilization rates, and lowered costs. Even after adding to SIA's capacity, the company's Japanese and American plants should be able to operate at an "over 100%" capacity rate in the next fiscal year, claims Takahashi.
The Japanese automaker has an export rate of roughly 80%, so every slide of 1 yen against the dollar lifts yearly operating profit by 10 billion yen ($87.8 million). The company has assumed an exchange rate of 100 yen to the dollar for the second fiscal half started in October. The yen's decline since Trump's victory has stoked expectations for stronger earnings in the market.
On average, analysts' latest predictions put Fuji Heavy's operating profit for fiscal 2016 down 29% on the year to roughly 403.6 billion yen -- surpassing the company's own predictions by around 30 billion yen. Takahashi said he would like to see the company generate profit at least equal to the savings from exporting under the weak yen.
Yet, the CFO views the yen's rapid decline as being at odds with economic reality, saying it "lacks reason." The company plans to use three-month forward-exchange contracts to lock down operating funds.
Since just before the Nov. 8 U.S. presidential election, shares in Fuji Heavy have risen by 18%, the biggest gain of any carmaker's stock. The advent of Trump has raised hopes for improvement in the American economy, but on the other hand, the rise in long-term interest rates may bring a chill wind to auto loans, said an analyst at the Japanese unit of a foreign securities company.