Honda Recalls Odysseys - Analyst Blog


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Honda Motor Co. ( HMC ) announced that it would recall 45,747 units of Odyssey minivans due to a problem with their power tailgates. It has been revealed that the power tailgates, when open, can drop unexpectedly, potentially injuring anyone standing underneath. So far, the defect resulted in two minor injuries caused by falling tailgates.

The recall affects Odysseys from the model year 2008 and 2009, which are equipped with power rear lift gates. Honda decided to begin the safety recall on March 13. The automaker will replace the parts in the power lift gate at no charge.

Odyssey's sales have been disappointing in the recent months. In January, the minivan's sales dipped 2% to 6,898 units.

Automotive safety recalls were brought into media focus after Toyota Motors ' ( TM ) announcement of the largest-ever global recall of about 11 million vehicles since September 2010. The automaker made greater than 15 recalls, more than any other automaker. They were related to problems associated with faulty accelerator gas pedals, slipping floor mats and defective braking systems.

Since 2011, 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 and a recent harsh Consumer Reports review of its popular Civic compact car.

In 2011, Honda'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 twin disasters in Japan and severe floods in Thailand.

Sales of Honda's CR-V small sport-utility vehicle grew 7.2% last year. However, sales of midsize Accord sedan ebbed 17% to 235,625 vehicles and that of smaller Civic fell 15% to 221,235 vehicles in the year.

In the second quarter of its fiscal year ended September 30, 2011, the Zacks #1 Rank (Strong Buy) company saw a 55% decline in profit to ¥60.4 billion ($788 million) or ¥33.53 (44 cents) per share in the second quarter of its fiscal 2012 from ¥135.9 billion or ¥75.24 per share in the year-ago period.

Consolidated net sales and other operating revenues in the quarter dipped 16% to ¥1.89 trillion ($24.60 billion) due to the disaster in Japan and unfavorable currency translation effects. At an unchanged exchange rate, Honda's revenues would have decreased 12%.

Consolidated operating profit slashed 68% to ¥52.51 billion ($685 million) from ¥163.47 billion ($782.07 million). The decrease was attributable to lower sales volume, unfavorable model mix, increase in fixed costs, higher raw material cost and unfavorable foreign currency translation effect.

The automaker could not provide any guidance for the fiscal year ending March 31, 2012 as it needed to evaluate the extent of the damage resulting from the severe floods in Thailand, which caused damage to inventories, and machineries and equipments of the company's consolidated subsidiaries and affiliates including Honda Automobile (Thailand) Co., Ltd.

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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 Nasdaq, Inc.

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