Retail sales in the U.S. were below 1st quarter 2006 retail sales by approximately 2,400 units due to lower sales of Forester, because of intense competition in the cross-over utility segment of the market where the Forester competes, and due to lower sales volume for Tribeca, whose inventory levels were being managed in anticipation of the launch of the new face-lifted 2008MY Tribeca in July. The resulting reduction in sales revenues of approximately $170 million was caused by reducing dealer inventories of prior year's models in preparation of the launch of the new 2008MY vehicles.
SOA's operating loss for the 1st quarter of 2007 decreased by approximately $2 million compared to the 1st quarter of 2006. This improvement is primarily related to decreases in incentive and SG&A expenses as well as changes to SOA's vehicle purchase prices to improve competitiveness in the U.S. market. These improvement areas were partially offset by a reduction in sales volume and in a shift in the model mix of vehicles sold to dealers.
Sales at SIA jumped $139 million as a result of a change implemented during this period in the sales point for vehicles shipped to SOA despite a 7 thousand units reduction in production volume.
Operating income dropped by $24 million, resulting in a loss of $7 million. The main factor of the profit decrease was a $39 million unfavorable difference in the production volume, price and model mix, which was partially offset by a $7 million decrease in fixed costs and a $7 million net improvement from overall cost reduction efforts.