Subaru Resolves Major Two Week Long Headache

Industry News

They can lay off the aspirin now.

A few days ago we reported that Subaru was experiencing a major problem at its only factory in Japan. Production had been shut down since January 16 due to the recently discovered defect in the electric power steering unit. Until it was resolved, production ground to a halt for all of its models because they all use the same assembly line. A production stoppage on that scale is one of the worst things that could happen to any automaker, and for a smaller one like Subaru, it has potentially catastrophic financial consequences. Fortunately, the issue has been fixed.

Subaru has just announced today that it has restarted production at its Yajima factory in Gunma Prefecture, Japan after a week and a half-long stoppage. The automaker says that "countermeasure parts for electric power steering units for Forester, Impreza, and Subaru XV models have now become available.”

All three of those vehicles are manufactured at Yajima. But the big question Subaru now needs to answer is how this production shutdown impacted finances. Bear in mind that Yajima accounts for nearly 60 percent of its entire global production. The only other Subaru factory in the world is located in Indiana, USA.

"Based on the contribution margin per vehicle, we estimate that a complete shutdown of Japanese production lines for one week would dent operating profits by 13.5 billion yen ($122 million),” said Nomura Securities analyst Masataka Kunugimoto last week when the shutdown was announced. If those figures are correct, then Subaru may have potentially lost up to $183 million in operating profits during that time period.

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A separate Asian financial publication also estimated the shutdown didn’t allow for the production of around 10,000 vehicles and even potential customer delivery delays. But Subaru had no choice but to stop production and find a fix as fast as possible. The power steering defect could cause the steering control unit light switch to turn on in the instrument panel, followed by a loss of power steering. With that no longer being an issue, it’s time to examine and determine the financial fallout.

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