Honda Expands Power Steering Recall - Analyst Blog

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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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: HMC , TM

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