GM China Recalls Cadillac SRX - Analyst Blog

General Motors Company ( GM ) announced that its Chinese joint venture with Shanghai Automotive Industry Corporation (SAIC ), Shanghai GM, will recall 9,862 units of the 2011 CadillacSRX model due to defective transmission systems.

A Chinese government quality control agency revealed that the defect could lead shift cables to get disconnected from the gearbox, disabling the vehicle to shift correctly. In a severe case, the problem could result in ignition trouble and lead to unexpected movements of the vehicle, increasing the risk of accident.

Shanghai GM will contact the affected vehicle owners and repair the transmission systems free of cost.

Shanghai GM was founded in 1997 with equal investments from each partner. In 2010,SAIC became the controlling stakeholder of the joint venture by purchasing an additional one percent stake.

The joint venture manufactures and sells Chevrolet, Buick, and Cadillac brand automobiles of GM in China. It also exports vehicles to countries such as, Chile.

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.

Since the beginning of 2010, GM recalled more than 3 million vehicles in the U.S., Canada, Mexico and South Korea. Among these, the largest recall was made in June last year, involving 1.5 million vehicles, in order to fix a problem with a heated windshield wiper fluid system that has been causing fire in the vehicles.

In October this year, the automaker recalled 6,000 units of Chevrolet Corvette Coupes due to a problem that may lead the model to fail to meet federal safety standards. It included Corvettes with 2011-2012 model years. Most of them were sold in the U.S. and some in Canada.

GM, aZacks #3 Rank (Hold) company, posted an 11% decline in profit to $1.74 billion in the third quarter of the year from $1.96 billion in the same quarter of 2011. Nevertheless, on a per share basis, the profit of $1.03 was higher than theZacks Consensus Estimate of 99 cents and compared with $1.20 in the third quarter of 2010.

The decline in profit during the quarter was attributable to lower interest income and other non operating income (net), loss on extinguishment of debt and income tax expense.

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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.

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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