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Honda Recalls for Braking Problem

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Honda Motor Co. (HMC - Free Report) plans to recall 250,000 vehicles around the world due to a problem with the braking system in certain models. The problem lies with the Vehicle Stability Assist control unit in the vehicles that can cause the car to brake when the driver does not press the brake pedal.

Honda revealed that an electrical capacitor on the Vehicle Stability Assist unit may have been damaged while manufacturing. As a result, the Vehicle Stability Assist unit could malfunction and apply brake for less than a second even when the driver is not pressing the brake pedal. The malfunction could also result in a brake force that could exceed the driver’s intended input.

The Vehicle Stability Assist unit in Honda vehicles assists drivers in maintaining control in abrupt braking, particularly on slippery grounds. The unit reduces power to the wheels and lowers the impact of braking; saving the vehicle from being skidded away.

Honda will recall 183,000 vehicles in the U.S. alone. They include 101,000 units of Pilot from the 2005 model year; 60,000 units of Acura MDX and 21,000 units of Acura RL from the same model year; and roughly 800 units of Acura MDX from 2006 model year.

Among the remaining vehicles, 56,000 units will be recalled in Japan, which includes Odyssey, Legend, StepWgn and Elysion models. About 8,000 vehicles will be recalled in Canada. 1,000 units in Australia, 300 units in Mexico and 70 units in Germany, which were manufactured between March 2004 and May 2006.

Honda has not yet received any reports of accidents or injuries related to the problem. The automaker will install a new electrical part free of charge in the defective vehicles. It will also inspect 51,000 units of Pilot vehicles in order to check whether the electrical ground bolt for the stability assist system is properly tightened so that dealers could tighten the bolt if required. The company will notify the vehicle owners in mid-April.

This is the third recall for Pilots and Odysseys in about three months. In late December, Honda recalled 318,000 units of Honda Odyssey minivans and 259,000 units of Honda Pilot SUVs from the 2003 and 2004 model years due to a problem with their ignition mechanism. According to the National Highway Traffic Safety Administration, the problem in the vehicles led to 16 crashes and 2 injuries. In January, Honda again recalled 750,000 units of Honda Pilots and Odysseys due to a problem with their driver side airbag.

Automotive safety recalls were brought into focus by media after Toyota Motors’ (TM - Free 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. Last year, the Transportation Department of U.S. slapped a fine of $17.35 million on Toyota due to a late response regarding a defect in its vehicles to safety regulators as well as late recall of those vehicles.

According to the department, it was the maximum allowable fine under the law for not initiating a recall in a timely manner. The latest fine adds to $48.4 million imposed by the U.S. government on the company in 2010 due to the late recall of millions of defective vehicles.

Honda, a Zacks Rank #3 (Hold) stock, reported a 62.5% increase in profits to ¥77.4 billion ($894.0 million) in the third quarter of fiscal 2013 ended Dec 31, 2012 from ¥47.7 billion in the same quarter of the prior fiscal year. Earnings per share rose 62.5% to ¥42.97 (57 cents) from ¥26.45 in the fiscal-2012 quarter

Revenues in the quarter escalated 24.9% to ¥2.4 trillion ($28.1 billion), driven by increased revenues from the company’s automobile business with the recovery of production from the impact of the flooding in Thailand.

Operating income nearly doubled to ¥131.9 billion ($1.5 billion) from ¥44.3 billion in the prior year, driven by higher sales volume and model mix as well as the impact cost reduction measures, partially offset by increased SG&A and R&D expenses.

Honda has projected revenues to rise 23.3% to ¥9.8 trillion in fiscal 2013. Operating profit is expected to improve 124.8% to ¥520.0 billion, net profit is anticipated to go up by 75.0% to ¥370.0 billion and earnings per share are expected to be ¥205.29 for the year.

Few stocks that are performing well in the industry where Honda operates include STRATTEC Security Corporation and Gentherm Incorporated (THRM - Free Report) Both are Zacks Rank #1 (Strong Buy) stocks.

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