Subaru hits brakes on shipments of 3 models over engine defect

Subaru hits brakes on shipments of 3 models over engine defect

Automaker faces potential US$80 million hit to profit if recall required.

TOKYO:
Subaru has halted shipments of three popular vehicle models manufactured in Japan after discovering an engine sensor problem.

The sales and shipment suspension, which started April 6, covers the Forester and Outback sport utility vehicles as well as the Levorg station wagon. The company does not expect shipments to resume for two and a half months.

Subaru said it found a sensor defect in the CB18 engine, one of the automaker’s signature “boxer” engines, used only in Japanese models.

The defect was discovered after complaints from drivers that the engine would not start, or that it would cut off while driving. Production of the affected models will be suspended in late April.

The automaker has shipped 54,000 of the affected models since October 2020. Subaru has responded by exchanging the parts after a driver reports an issue, but a broader recall is possible depending on the cause of the problem.

The halt likely will reduce Subaru’s shipments by 9,000 to 10,000 vehicles, automotive analysts estimate, based on the two-and-a-half-month time frame.

If Subaru also recalls the affected models, it could take a hit of more than ¥10 billion (US$80 million) to group operating profit, said Akira Kishimoto at JPMorgan Securities Japan.

“That is equivalent to 10% of its consolidated operating profit projection” for fiscal 2021, Kishimoto said.

The Japanese automaker already estimates a 2% drop in operating profit for fiscal 2021 amid challenges including the chip shortage.

Subaru shares slumped as much as 6% in Tokyo on Friday. The company said production will switch to other models it had been unable to make due to parts shortages.

The sensor defect could be a setback for Subaru’s efforts to restore trust in its brand after an inspection scandal and quality control issues in 2017 and 2018. The automaker’s medium-term plan released in 2018 positions quality as its top priority.

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