GM Recalls Aveo in China - Analyst Blog


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General Motors Company 's ( GM ) joint venture with Shanghai Automotive Industry Corporation (SAIC), Shanghai GM, will recall 47,415 units of Chevrolet Aveo cars in order to fix their faulty brake fluid sensors. The cars belong to the model year 2012.

The General Administration of Quality Supervision, Inspection and Quarantine revealed that it is a supplier's fault. The defect could fail to alert drivers about low brake fluid levels. The company will fix the sensors free of charge.

This is the third vehicle safety recall of GM in China since December last year. Late December, Shanghai GM had recalled 9,862 units of 2011 Cadillac SRX model due to defective transmission systems.

Then, earlier in March, GM recalled 16,618 units of Chevrolet Captiva and Opel Antara crossover sports utility vehicles in China due to a problem with the antilock braking system in the vehicles. The recall involved vehicles that were manufactured between April 11, 2006, and November 9, 2009.

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. also imposed a fine of $48.4 million on the company due to late recall of millions of defective vehicles.

Auto sales in China grew 5% to 1.62 million vehicles in April after recording a slack first quarter. However, sales in the first four months of the year slid 1.3% to 6.4 million vehicles owing to tighter credit policies and slower economic growth.

GM's total sales in China grew 11.7% to 227,217 vehicles during the month. Shanghai GM sales went down 2.2% to 94,101 units while SAIC-GM-Wuling sales went up 27 % to 127,362 units.

GM, a Zacks #3 Rank (Hold) company, reported a $100 million fall in profits to $1.6 billion in the first quarter of 2012 from $1.7 billion in the same quarter of 2011, before special items, due to lower profits from its European operations.

On per share basis, adjusted profits were 93 cents during the quarter, down 2 cents from the first quarter of 2011. However, it exceeded the Zacks Consensus Estimate of 84 cents. Adjusted earnings before interest and taxes (EBIT) dipped to $2.2 billion in the quarter from $2.0 billion in the year-ago quarter.

Revenues in the quarter went up 4% to $37.8 billion on a 3% rise in unit sales to 2.3 million vehicles globally. It was higher than the Zacks Consensus Estimate of $36.4 billion. The automaker occupied a worldwide market share of 11.3% during the quarter, compared with 11.4% a year ago.

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