GM Recalls Roll-Away Cars
On the tail of its best December for U.S. sales in five years, General Motors (NYSE:GM) said that it will be recalling nearly 70,000 full-size trucks and vans around the world because of potential problems with steering column. Most of the 55,000 vehicles that will be recalled in the U.S. are believed to still be on, or in transit to, dealer lots. The defect is suspected to have occurred in one out of every 1,000 vehicles, and could cause the cars to roll away when thought to be parked.
Unfortunately, GM has been plagued recently by growing series of relatively small recalls. A recall in December affected about 145,000 mid-sized pickups which were feared to be missing a hood latch. Before that, GM issued a 250,000-vehicle recall in August because of an electrical problem that may have caused a fire. Together with Toyota (NYSE:TM) and Ford (NYSE:F), car makers littered 2012 with recalls while at the same time pumping up sales traffic.
Catalysts are critical to discovering winning stocks. Check out our newest CHEAT SHEET stock picks now.
The combination of the two — higher sales volume as well as high recall volume — has raised concerns that quality control at manufacturers, ostensibly a measure of concern for safety, is taking a second seat. Demonstrating such concern, and perhaps growing frustrated with manufacturers, the National Highway and Traffic Administration slapped Toyota with a record $17.5 million civil penalty for failing to report a defect to the federal government in a timely matter.
Toyota’s safety procedures have been in focus for at least two years in the wake of multi-million-vehicle recalls related to steering problems, possible fire, and unintentional acceleration. U.S. Transportation Secretary Ray LaHood said in a statement that, “Safety is our highest priority. With today’s announcement, I expect Toyota to rigorously reinforce its commitment to adhering to United States safety regulations.”
As long as GM keeps the federal government in the loop and acts in good faith, then it should have no reason to fear LaHood. As Toyota knows, manufacturing defects aren’t just a safety issue. They are a liability to the bottom line, not just in the form of labor and costs associated with fixing the problem, but potential fines and related legal fees.