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Auto Recall Issues Persist: Fiat, Honda, Daimler in Focus

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Auto companies globally have been reeling under the impact of recalls, of late. A recall is issued when a vehicle or its parts pose safety risks or do not comply with the stipulated norms.

In case of a recall, auto manufacturers are required to solve the problem through replacement, repair, and refund or in extreme cases repurchase the defective vehicle. Auto companies are bearing the brunt of negative portrayal with recalls frequently making headlines. These can be attributed to various issues, for instance non-compliance with the emission standards, risk of fire, brakes & wheels related concerns, hatchback problems and of course faulty Takata airbag deflators.

Recall Episode

In the past month, the auto industry has been embroiled in various cases of auto recall by incumbents such as Fiat Chrysler Automobiles N.V. (FCAU - Free Report) , Honda Motor Co., Ltd. (HMC - Free Report) , Daimler AG (DDAIF - Free Report) and British multinational car manufacturer, Jaguar Land Rover.

Earlier this month, Honda announced that it is likely to recall around 1 million older vehicles in the United States and Canada. The company is likely to recall many of its popular models for the second time as the Takata airbag inflators that were installed at the time of the previous recalls could pose serious safety hazards. Just a couple of days later, Fiat Chrysler made the announcement of recalling approximately 965,000 gasoline vehicles that don’t comply with U.S. emission standards. The flawed vehicles are from the United States and Canada that will require catalytic converter replacements.

Adding to the woes of the industry, again, almost at the same time, it was reported that Jaguar Land Rover is going to recall 44,000 vehicles in the United Kingdom owing to release of CO2 emissions higher than the permissible limit. The recall is likely to affect vehicles equipped with JLR’s 2.0-liter diesel engine in cars built between 2014 and 2018. In another incident, just a week ago, it was announced Daimler Trucks North America is recalling more than 3,300 heavy-duty Freightliner Cascadia trucks due to a probable air bag glitch in the steering wheel.

Conclusion

The reports of frequent recalls of a huge number of vehicles on various grounds such as faulty airbags, non-compliance of emission norms, seat belts, etc. indicate widespread failure of quality and safety issues. The auto manufacturers need to introspect deeply in order to eliminate the risks of driving.

Among the stocks discussed above, Fiat Chrysler and Honda currently carry a Zacks Rank #3 (Hold). Daimler presently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Honda, Daimler and Fiat Chrysler have an expected long-term growth rate of 1.7%, 2.7% and 8.9%, respectively.

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