UPDATE 1-Fuji Heavy revises sales target as China plan hits snag
* Fuji Heavy drops goal for local China production before 2015/16
* Cuts global sales target by 50,000 to 850,000 for 2015/16
* Maintains operating profit, margin targets despite stronger yen
* Plans capacity expansion in Japan, U.S. beyond initial target
* Full-year operating profit down 48 pct, in line with forecasts
By Chang-Ran Kim
TOKYO, May 8 (Reuters) - Fuji Heavy Industries Ltd said it no longer expects to start building cars in China as part of a five-year growth plan that runs until March 2016, and lowered its global sales target for the final year by 50,000 vehicles.
The maker of Subaru cars had mapped out the plan in July last year, aiming to boost global sales by 40 percent to 900,000 vehicles by March 2016, driven in large part by a tripling in Chinese sales.
Fuji Heavy said on Tuesday that it would continue to import cars into China after an unsuccessful bid to obtain Chinese government approval for a joint venture with local car maker Chery Automobile Co Ltd to build Subaru cars there.
Foreign automakers are required to partner with a Chinese company to produce cars for the local market, and Beijing recently tightened the approval process to favour ventures that plan to make technologically advanced vehicles such as hybrids and electric cars. A Chinese tariff of 25 percent on imported cars makes it difficult to sell in large volumes.
"We haven't given up on local production in China," President and Chief Operating Officer Yasuyuki Yoshinaga told a news conference.
"We'll keep waiting patiently for any progress," he said, conceding that plans to start building in the world's biggest car market next year were no longer realistic.
He did not give a new target timeframe for China production.
Yoshinaga will take over as chief executive of Fuji Heavy from June, when Ikuo Mori steps down to become an adviser.
The niche maker of Legacy and other boxer-engine cars now expects to sell 850,000 vehicles in 2015/16, with stronger-than-expected sales in the United States offsetting part of the shortfall in China. The company now projects Chinese sales at 100,000 vehicles for that year, from an earlier 180,000 target.
Fuji Heavy said it would add capacity at factories in the United States and Japan by a combined 45,000 vehicles per year by mid-2014, and would consider further expansion in North America beyond the mid-term plan.
With earnings and vehicle sales in the plan's first year outpacing targets, Fuji Heavy maintained its operating profit target for the final year at 120 billion yen ($1.50 billion) and profit margin at 6 percent. That is despite assumptions for a stronger Japanese currency, at 80 yen to the dollar and 105 yen to the euro. It previously assumed a more favourable dollar rate of 90 yen and euro of 120 yen.
On Tuesday, the dollar was trading about 80 yen and the euro around 104.3 yen.
Fuji Heavy also reported on Tuesday a 48 percent year-on-year decline in operating profit to 44.0 billion yen for the year ended March as supply disruptions stemming from last year's earthquake in Japan interrupted brisk sales in the United States, its biggest market.
The result was roughly in line with an average estimate for 43.3 billion yen from 19 analysts polled by Thomson Reuters I/B/E/S.
For the year ending March 2013, the company forecast operating profit to rise 52 percent to 67 billion yen and net profit to grow 25 percent to 48 billion yen.
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