GM Recalls Full-Size Vans

General Motors Company (GM - Analyst Report) announced it would recall 10,315 units of full-size vans in 20 cold-weather U.S. states and in Canadabecause offuel filler pipes that can rust and leak due to salt and chemicals used to clear snow from roads. The recall covers Chevrolet Express and GMC Savana vans from the model years 2003 to 2004 with left-side cargo doors.

GM will recall 9,389 vans in 20 U.S. states, including Connecticut, Delaware, Illinois, Indiana, Iowa, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, West Virginia and Wisconsin. The remaining 926 vans will be recalled in Canada.

GM revealed that salt and chemicals are prone to be trapped in a conduit that covers the fuel filler pipe and cause corrosion. As a result, gasoline may leak and lead to fire in the vehicles. However, the company has not yet received any reports of fire or injuries due to the problem.

GM has decided to fix the problem free of cost and will notify vehicle owners in October with the availability of required parts. The company has already sent letters to the owners detailing special repair coverage for the problem.

Automotive safety recalls were brought into focus by media after Toyota Motors’ (TM - Analyst Report) 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.

Recently, GM announced its plan to recall 38,000 units of Chevrolet Impala police cars in North America after receiving complaints from two police fleet about front lower control arms that had fractured. The recall, which is expected to begin on August 21, covers 36,413 cars in the U.S. and 1,713 in Canada from the 2008–2012 model years.

GM, a Zacks #3 Rank (Hold) company, reported a sharp 41% fall in profits to $1.49 billion or 90 cents per share in the second quarter of the year from $2.52 billion or $1.54 in the same quarter of 2011. Nevertheless, profits exceeded the Zacks Consensus Estimate by 15 cents per share.

Revenues in the quarter fell 4.5% to $37.61 billion, which is lower than the Zacks Consensus Estimate of $37.98 billion. Unit sales rose 3% to 2.39 million vehicles from 2.32 million vehicles in the second quarter of 2011. The automaker occupied a worldwide market share of 11.6% during the quarter, down from 12.3% a year-ago.

Adjusted earnings before interest and tax (EBIT) dipped 28% to $2.12 billion from $2.96 billion in the second quarter of 2011. Operating profit ebbed 26% to $1.82 billion from $2.45 billion a year ago.

The decline in profits and revenues was attributable to strengthening of U.S. dollar against most of the major currencies as well as weak macroeconomic conditions globally, especially in Europe and South America.