Subaru halts Japan car output on defective part, shares slide

Dunya News

The logo of Subaru Corp. is pictured at the 45th Tokyo Motor Show in Tokyo, Japan October 25, 2017.

TOKYO (Reuters) - Subaru Corp (7270.T) said its sole car factory in Japan accounting for roughly 60 percent of global production had halted output a week ago after it discovered a defect in a component procured from a supplier.

Shares in Japan s sixth-largest automaker slid 6 percent in early trade on the news, which was first reported in the Asahi newspaper on Wednesday. The benchmark Nikkei average .N225 was flat.

The plant is one of only two operated by Subaru globally and manufactures the popular Impreza, Legacy and Forester models, among others. Its closure could further hurt earnings which are already on track for a third-straight annual drop.

Subaru, which exports the majority of its domestically made cars, said it was still in the process of identifying where the defect was, and could not say when production would resume. Output had been halted since the night shift on Jan. 16, it said.

The Asahi said the defect was found in the power steering unit, but Subaru said that had not been confirmed. The newspaper said the impact on production so far likely exceeded 10,000 units, and that delays were starting to be seen in delivery to customers.

The automaker said it was investigating whether its U.S. plant had been affected, although production was continuing there for the time being. Subaru counts on the United States for more than 60 percent of global vehicle sales.

Subaru is reeling from stagnant sales growth in the United States and fresh recalls in Japan due to new cases of inspection cheating. In November, it slashed its profit forecast by a quarter citing rising recall costs.

A day before the stoppage, Subaru announced production and sales plans for this year, saying it planned to build 650,000 vehicles in Japan, and 1.03 million globally, up 1 percent on the year.

It has forecast record global sales of 1.08 million vehicles, of which 700,000 are expected to come from the profitable U.S. market.

Subaru’s last major production shutdown occurred after the Great Tohoku earthquake in 2011 due to power outages and supply chain disruptions.