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General Motors Company (GM - Analyst Report) announced that it would recall 50,500 units of Cadillac SRX luxury crossover vehicles due to a software glitch that may cause non-deployment of airbags in case of an accident, leading to injuries for ones sitting in the right rear seat.
GM officials revealed that the front passenger is supposed to deploy even if no one is seated. However, the air bags are programmed in such a way that the airbag system will be turned off in case someone does not sit in the front passenger seat.
Therefore, in case of an accident, the front passenger-side airbag will not open up, thereby leaving passengers at the rear seat at risk. As a result, the company needs to reprogram the airbag software system.
The problem exists only with the vehicles sold in North America, as they are only equipped with the automatic occupant sensing system. However, the exported models use a manual key to disable the passenger side airbag.
The recall affects 47,401 vehicles in the U.S. and the rest in Canada and Mexico from the 2011 model year. GM is unaware of any crashes, injuries or complaints related to the problem.
The SRX and the CTS sedan are the top-selling Cadillac models in the U.S. In the first five months of the year, SRX sales escalated 18% from the year-ago level.
Automotive safety recalls were brought into focus by media after Toyota Motors’ (TM - Analyst Report) announcement of the largest-ever global recall of 14 million vehicles since November 2009.
The Japanese automaker’s recall was related to problems such as faulty accelerator gas pedals and slipping floor mats as well as defective braking systems. The Transportation Department of U.S. also imposed a fine of $48.4 million due to late recall of millions of defective vehicles.
Since the beginning of 2010, GM recalled about 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.
Recently, GM recalled 2,100 units of its top selling model, Chevrolet Cruze, in the U.S. The recall was related to a problem with their steering wheel, which came loose in one of the sedans. Consumer Reports stated that the steering wheel in the vehicle had been installed improperly.
GM, a Zacks #3 Rank (Hold) stock, earned a profit of $3.2 billion or $1.77 per share in the first quarter of 2011 that increased more than threefold from $865 million or 55 cents per share a year ago.
However, more than half of the profits have been contributed by one-time gain from sales of the company’s ownership interest in Delphi Automotive LLP ($1.6 billion) and Ally Financial Inc. ($300 million).
Excluding these gains and a $0.4 billion goodwill impairment charge at GM Europe (GME) resulting from a change in accounting standards and charges of $0.1 billion at GM International Operations (GMIO) based on revised tax regulations that affected the company’s India joint venture, GM’s profit stood at $1.7 billion or 95 cents per share, topping the Zacks Consensus Estimate by a penny. It was also GM's biggest profit in 11 years since earning $1.8 billion in the second quarter of 2000.
Revenues during the quarter went up 15% to $36.2 billion on sales of 2.2 million vehicles globally, up 11% from the prior year. It exceeded the Zacks Consensus Estimate of $35.2 billion.
Strong demand for its fuel-efficient lineups such as Cruze compact and Equinox crossover helped boost the company’s sales. The automaker occupied a market share of 11.5% during the quarter, up from 11.1% in the year-ago quarter.