GM Recalls to Fix Hood Latches

GM Recalls to Fix Hood Latches - Analyst Blog

General Motors Company (GM) decided to recall 145,628 units of mid-sized pickup trucks across its global markets because their hoods can open unexpectedly and obstruct the driver’s view, increasing the risk of a crash.

The recall would involve Chevrolet Colorado and GMC Canyon midsize trucks from 2010–2012 model years. It will include 118,800 trucks in the U.S., 15,264 units in Canada, 7,492 units in Mexico and the remaining exported to other countries.

According to the National Highway Traffic Safety Administration (NHTSA), hoods in some of the trucks may lack a secondary hood latch. As a result, if the primary latch is not fastened, the hood could open accidentally while the vehicle is in motion. So far, GM received four reports of missing secondary latches in the trucks but no reports of crashes or injuries due to the problem.

GM will ask the vehicle owners to inspect their vehicles for missing secondary hood latches or take their trucks to a dealer for inspection. The company decided to install the secondary latch, if it is missing. It would begin mailing letters to owners on January 17.

GM seems to be very cautious about finding and fixing the defects in their vehicles in order to keep its brand value intact. Of late, the company made a number of vehicle safety recalls.

In October last year, the company recalled 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 included 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.

A month later, the automaker also recalled 15,575 units of few Buick, Cadillac and Chevrolet model cars in order to fix their defective driver-side air bags and head restraints.

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.

Recently, the Transportation Department of U.S. slapped a fine of $17.35 million on Toyota due to late response regarding a defect in its vehicles to safety regulators as well as late recall of those vehicles. According to the department, it was the maximum allowable fine under the law for not initiating a recall in a timely manner. The latest fine adds to $48.4 million imposed by the U.S. government on the company in 2010 due to late recall of millions of defective vehicles.

Toyota also decided to pay $1.1 billion to settle a class-action lawsuit related to complaints of unintended acceleration in its vehicles. According to a plaintiff lawyer, the settlement is one of the largest in a lawsuit in the history of automotive industry.

GM, a Zacks #3 Rank (Hold) stock, posted a 9.7% fall in earnings to 93 cents per share (excluding special items) in the third quarter of the year from $1.03 in the corresponding quarter a year ago. However, earnings per share in the quarter far exceeded the Zacks Consensus Estimate of 61 cents.

Total profit ebbed 5.9% to $1.6 billion from $1.7 billion a year go. The decline in profit was attributable to lower profits from North America and increased loss in Europe.

Revenues in the quarter grew 2.5% to $37.6 billion, surpassing the Zacks Consensus Estimate of $36.3 billion. Worldwide sales volume inched up 1.6% to 2.3 million units from 2.2 million units a year ago. However, total market share declined to 11.6% from 12.1% in the third quarter of 2011.

Operating income fell 11.2% to $1.6 billion from $1.8 billion a year ago. However, adjusted earnings before interest and tax (EBIT) rose 4.5% to $2.3 billion from $2.2 billion a year ago.