Honda Expands Power Steering Recall - Analyst Blog
October 04 2012 - 8:15AM
Zacks
Honda Motor Co. (HMC) has expanded its May
recall to fix defective power steering hose by including 572,000
units of Accord V6 midsize sedan in the U.S. The vehicles belong to
2003-2007 model years.
Honda noticed that exposure to high under-hood and power steering
fluid temperatures over time may cause the power steering hose to
disintegrate and develop a fluid leak. The problem could lead to
loss of power steering. If the fluid leaks into a catalytic
converter, it may also lead to smoke or fire.
Honda revealed that a new power steering hose is required to
complete final repair of the vehicles. However, the replacement
hoses will not be available until early 2013.
Honda has not yet received any reports of crashes or injuries but
one engine fire related to the problem. The company will inform the
owners by letter about the issue and a second letter will be sent
once the hoses become available so that they can take their
vehicles to the dealers for a free repair.
The May recall for power steering hoses involved 56,881 units of
2007–2008 Acura TL sedans in North America. The company has
recalled 52,615 units in the U.S. and 4,266 units in Canada.
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.
From the beginning of 2011 till date, Honda’s largest recall
included 1.5 million cars in the U.S. due to a problem with the
transmission system. The recall included CR-V (model year
2007-2010), Elements (2005-08) and Accords with 4-cylinder engines
(2004-10).
Honda, a Zacks #5 Rank (Strong Sell), revealed more than fourfold
increase in profits to ¥131.72 billion ($1.66 billion) or ¥73.09
(92 cents) per share in the first quarter of its fiscal year ending
March 31, 2013 from ¥31.80 billion or ¥17.64 in the comparable
quarter of 2011. However, the company’s profits were lower than the
Zacks Consensus Estimate of $1.15 per share.
Consolidated net sales and other operating revenues surged 42.1% to
¥2.44 trillion ($30.71 billion), driven by higher revenues in the
automobile business with the recovery in production from the twin
disaster in Japan last year, and increased revenues in the
motorcycle business, despite unfavorable foreign currency
translation effects.
Consolidated operating profits increased significantly by 679.5% to
¥176.01 billion ($2.22 million) from ¥22.58 billion a year ago,
driven by higher sales volume and model mix, despite increased
SG&A and R&D expenses as well as unfavorable foreign
currency effects.
Honda has projected revenues to improve 29.6% to ¥10.30 trillion in
fiscal 2013. Operating profits are expected to increase 168.0% to
¥620 billion, net profits are anticipated to rise 122.2% to ¥470
billion and earnings per share are expected to be ¥260.78 for the
year.
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