GM Recalls for Faulty Air Bags

General Motors Company ( GM - Analyst Report ) plans to recall 15,575 units of few Buick, Cadillac and Chevrolet model cars in order to fix their defective driver-side air bags and head restraints. The problem could lead to injury in case of a crash.

The National Highway Traffic Safety Administration (NHTSA) reported that the recall includes 2,949 units of Buick Verano, Chevrolet Cruze and Chevrolet Sonic compacts due to the problem with the air bags that might not deploy in a crash. In addition, the company would recall 12,626 units of 2013 Cadillac XTS sedans for fixing rear-seat head restraints that might not lock in position.

The company’s dealers will repair the vehicles free of charge. They will replace the steering-wheel air-bag coil on the compact cars and the head restraints on the Cadillac sedans.

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. had also imposed a fine of $48.4 million on the company due to late recall of millions of defective vehicles.

GM seems to be very cautious about finding and fixing the defects in their vehicles in order to keep its brand value intact. Of late, the company made a number of vehicle safety recalls.

At the beginning of October, the company has announced plans to recall 40,859 cars in warm-weather states in the U.S. due to a problem with their plastic-made fuel pump modules that could crack and cause a fuel leak and fire.

The recall included Chevrolet Cobalt and Pontiac G5 sedans from the 2007–2009 model years, and Chevrolet Equinox, Pontiac Torrent SUVs, and Saturn Ion sedans from the 2007 model year.

GM, a Zacks #3 Rank (Hold) company, posted a 9.7% fall in earnings to 93 cents per share (excluding special items) in the third quarter of the year from $1.03 in the corresponding quarter a year ago. However, earnings per share in the quarter far exceeded the Zacks Consensus Estimate of 61 cents.

Total profit ebbed 5.9% to $1.6 billion from $1.7 billion a year go. The decline in profit was attributable to lower profits from North America and increased loss in Europe.

Revenues in the quarter grew 2.5% to $37.6 billion, surpassing the Zacks Consensus Estimate of $36.3 billion. Worldwide sales volume inched up 1.6% to 2.3 million units from 2.2 million units a year ago. However, total market share declined to 11.6% from 12.1% in the third quarter of 2011.

Operating income fell 11.2% to $1.6 billion from $1.8 billion a year ago. However, adjusted earnings before interest and tax (EBIT) rose 4.5% to $2.3 billion from $2.2 billion a year ago.