Why pandemic cutbacks helped profits at Japanese automakers

When it came to quarterly earnings, Subaru Corp. wowed them all with an eye-popping nearly 18-fold surge in operating profit. Subaru’s strong showing came even as sales took a hit. It reflected a springback from the year-earlier period, when profits were hammered by huge warranty costs.

Even though worldwide sales, which cover wholesale volume overseas, fell 4.6 percent to 230,300 vehicles in the July-September period, Subaru says it is rapidly rebounding from the crisis.

In the U.S., by far Subaru’s biggest and most important market, sales dropped 8.8 percent in the quarter to 169,446 vehicles, but September sales climbed 16 percent to notch the company’s best-ever results for the month. And Subaru’s upswing looks set to continue, with sales setting an October record on an 11 percent increase.

“In North America, we are seeing a faster-than-expected recovery trend,” CEO Tomomi Nakamura said. Subaru’s U.S. inventory bottomed out in July and has been steadily recovering since then, Nakamura said. But there remains much uncertainty about the trajectory amid concern about a winter wave of COVID-19 outbreaks, he cautioned.

“We are still working out carefully an estimate for the January to March quarter. It is hard to say if we can remain bullish or not,” he said. “We are not optimistic yet.”

Subaru also lifted its earnings outlook for the full fiscal year, but it still expects revenue and operating profit to come in below last year’s results.

Breaking ranks in last week’s earnings from Japan was troubled Mitsubishi Motors Corp.

It slumped to an operating loss in the July-September quarter, and its net loss widened in the period. Sales tumbled 28 percent, and it was alone in not lifting its full-year forecast.

Mitsubishi CEO Takao Kato said U.S. sales have fallen off steeply partly because the company has dialed back fleet sales. U.S. inventories have fallen by half, he said, and Mitsubishi wants to start building a rebound in the country in the rest of the fiscal year.

Naoto Okamura contributed to this report.

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