Honda Recalls SUVs

Zacks Investment Research
updated | Zacks.com

Honda Motor Co. (NYSE:HMC) revealed that it would recall 554,000 units of CR-V compact SUVs and Pilot large SUVs due to a problem with their headlight wiring. The CR-Vs belong to the 2002–2004 model year and Pilots to 2003.

The automaker detected potential flaws with the headlight switch in some of the vehicles. The flaw could lead to blacking out of low-beam headlights, thereby increasing the risk of a crash. However, the company has not yet received any reports of injuries or crashes related to the problem.

Honda will begin notifying the vehicle owners in late April. The dealers would inspect the headlight wiring and replace the defective components if necessary.

Automotive safety recalls were brought into focus by media after Toyota Motors(NYSE:TM) announcement of the largest-ever global recall of more than 10 million vehicles since September 2010. The automaker made greater than 15 safety recalls, more than any other automaker.

Recently, another Japanese automaker, Mazda Motor and its three-party joint venture partners Ford Motor Co. (NYSE:F) and Chongqing Changan Automobile revealed their plans to recall 58,949 units of Mondeo sedans and 3,496 units of S-Max vehicles in China. The recall was related to a problem with the anti-lock braking systems that could cause false warnings. The joint venture decided to replace the defective parts.

In 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).

Apart from vehicle recalls, Honda has been struggling with lower sales and profits, adverse impact from earthquake and tsunami in Japan as well as severe flooding in Thailand. In 2011, the automaker’s sales dipped 6.8% to 1.15 million vehicles due to production disruptions caused by parts supply shortages and plant shutdowns on the back of the disasters in Japan and Thailand.

The Zacks #4 Rank (Sell) company reported a 41% decline in profits to ¥47.6 billion ($613 million) or ¥26.45 (34 cents) per share in the third quarter of fiscal 2012 ended December 31, 2011 from ¥81.1 billion or ¥45.01 per share in the same quarter of prior fiscal year.

Revenues in the quarter dipped 8% to ¥1.9 trillion ($25.0 billion), driven by lower revenues due to disruptions in supply of parts caused by the problems in Japan and Thailand and due to continued appreciation of yen against dollar.

 
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