Next is our explanation of changes in increase and decrease of operating income, from 18.9 billion yen to 1.0 billion yen.
Factors of increase include improvement of sales volume & mixture, which will amount to 32.4 billion yen. The increase is classified into the following three items: (1) an increase of 7.2 billion yen in domestic operating income due to increasing sales volume of passenger cars to be sold, which will lead to an improvement in sales volume & mixture; (2) an increase of 14.4 billion yen in overseas operating income due to increased sales volume; (3) an increase of 10.8 billion yen in Others.
R&D expenses will decrease 1.6 billion yen (from 26.6 billion yen to 25.0 billion yen), because many R&D expenses already peaked in the first half of the preceding fiscal year.
Meanwhile, factors of decrease include currency exchange loss 29.3 billion yen. Specifically, a 20-yen appreciation against the US dollar will cause a -27.8 billion yen decrease; a seven-yen appreciation against Euro will cause a -0.9 billion yen decrease; a six-yen appreciation against the Canadian dollar will cause a -0.6 billion yen decrease.
Increase of SG&A expenses and others will decrease 21 billion yen. The decrease is classified into the following four items. First, (1) A -8.9 billion yen increase in manufacturing fixed costs (FHI -8.2 billion yen and SIA -0.7 billion yen) and FHI’s increase in suppliers’ mold costs and increase in fixed processing costs, while SIA will see decreases in outsourced tooling costs and in depreciation because of the new model launch cycle. Others processing costs are expected to increase. As a result, SIA will have an increase in expenses. (2) Increase in SG&A expenses 7.6 billion yen. Domestic SG&A expenses will increase by 4.3 billion yen due to releases of new model cars. Meanwhile, overseas expenses will decrease income by 3.3 billion yen. SOA plans to cut the incentive per unit by $200 dollars year on year but increase advertisement expenses, etc. Other overseas bases will also increase SG&A expenses. (3) Increase in accrued warranty claims (-3.2 billion yen) due to increased allowance for product warranty along with increased sales in overseas markets. (4) Others will be at -1.3 billion yen.
Reduction in cost, net of raw material price raise will be -1.6 billion yen, consisting of FHI’s -2.3 billion yen and SIA’s +0.7 billion yen. Higher raw material prices due to soaring prices of steel plates, crude oil, and precious metals will amount to 11.7 billion yen.

As a result of the above, operating income will decrease by 17.9 billion yen.