GM Recalls 40K Cars for Fuel Leak - Analyst Blog
October 01 2012 - 12:52PM
Zacks
General Motors Company (GM) plans to recall
40,859 cars in warm-weather states in the U.S. due to a problem
with their plastic-made fuel pump modules that could crack and
cause a fuel leak and fire.
The recall will include Chevrolet Cobalt and Pontiac G5 sedans from
the 2007–2009 model years, and Chevrolet Equinox, Pontiac Torrent
SUVs, and Saturn Ion sedans from the 2007 model year.
The vehicles meant for recall were sold or currently registered in
Arizona, California, Florida, Nevada or Texas. Meanwhile, recall of
Chevrolet Cobalt includes owners based in Arkansas and
Oklahoma.
GM began investigating the problem in 2011 after receiving report
from a dealer about fuel leakage in some vehicles. However, the
company has not yet received any reports of fires or injuries due
to the problem.
GM dealers will repair the vehicles free of cost. The vehicle
owners will be notified by mail about the recall.
Automotive safety recalls were brought into focus by media after
Toyota Motors’ (TM) announcement of the
largest-ever global recall of 3.8 million vehicles in September
2009, triggered by a high-speed crash that killed 4 members of a
family.
Later on, a string of recalls has led Toyota to face numerous
personal injury and wrongful death lawsuits in federal courts. The
Transportation Department of U.S. had also imposed a fine of $48.4
million on the company due to late recall of millions of defective
vehicles.
GM seems to be very cautious about finding and fixing the defects
in their vehicles in order to keep its brand value intact. From the
last month, the company made a number of recalls.
Recently, the automaker revealed its plan to recall 473,841 units
of midsize cars in the U.S., Canada and Mexico in order to fix
their defective transmission. As many as 426,240 units will be
recalled in the U.S., 40,029 units in Canada and 7,572 units in
other markets. It will include 2007-2010 Chevrolet Malibus, Pontiac
G6s and Saturn Auras, all with four-speed automatic
transmissions.
GM, a Zacks #3 Rank (Hold) company, reported a sharp 41% fall in
profits to $1.49 billion or 90 cents per share in the second
quarter of the year from $2.52 billion or $1.54 in the same quarter
of 2011. Nevertheless, profits exceeded the Zacks Consensus
Estimate by 15 cents per share.
Revenues in the quarter fell 4.5% to $37.61 billion, which is lower
than the Zacks Consensus Estimate of $37.98 billion. Unit sales
rose 3% to 2.39 million vehicles from 2.32 million vehicles in the
second quarter of 2011. The automaker occupied a worldwide market
share of 11.6% during the quarter, down from 12.3% a year-ago.
Adjusted earnings before interest and tax (EBIT) dipped 28% to
$2.12 billion from $2.96 billion in the second quarter of 2011.
Operating profit ebbed 26% to $1.82 billion from $2.45 billion a
year ago.
The decline in profits and revenues was attributable to
strengthening of U.S. dollar against most of the major currencies
as well as weak macroeconomic conditions globally, especially in
Europe and South America.
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