Honda Recalls on Suspension Failure - Analyst Blog

Honda Motor Co. (HMC) announced that it will recall 10,800 units of Accord sedans and Pilot sport utility vehicles (SUVs) in order to fix a problem with the front suspension of the vehicles. The recall includes Accord sedans of model year 2010-2011 and Pilot SUVs of 2011, sold in the U.S.

Honda revealed that the vehicles encountered some fault in the machinery used for tightening the spindle nuts on the front axles due to flawed software. It could lead to failure of the front suspension in the vehicles. The automaker will notify the vehicle owners this week and the repairs will be carried out at its dealerships.

Since the beginning of the year, Honda has recalled more than 1 million vehicles due to problems related to air bag inflators and faulty ignition systems. The recalled lineups include Accord, Civic, Odyssey, CR-V, Pilot, Acura TL and Acura CL in the U.S. as well as the Inspire, Saber and Lagreat in Japan.

Automotive safety recalls have become the talk of the town after Toyota Motors' (TM) announcement of the largest-ever global recall of about 11 million vehicles since September last year. The automaker made greater than 15 recalls, more than any other automaker. They were related to problems associated with faulty accelerator gas pedals, slipping floor mats and defective braking systems.

Recently, The Transportation Department of U.S. informed that Toyota will pay $32.4 million in fines related to two separate investigations leading to late recall of millions of defective vehicles on top of the highest-ever fine of $16.4 million paid earlier this year related to the same issue.

Honda, a Zacks #2 Rank (Buy) stock, showed a profit of ¥135.93 billion ($1.62 billion) or ¥75.24 (90cents) per share in the second quarter of its fiscal 2011, which more than doubled from ¥54.04 billion ($644.81 million) or ¥29.78 (36 cents) per share in the year-ago period (at constant exchange rates).

Consolidated net sales and other operating revenues in the quarter gained 9.5% to ¥2.25 trillion ($26.85 billion) driven by higher revenues in the Automobile segment, offset partially by unfavorable currency translation effects. At constant exchange rates, Honda's revenues increased 14.4%.

Consolidated operating profit increased more than two fold to ¥163.47 billion ($1.95 billion) from ¥65.54 billion ($782.07 million). This was attributable to higher sales volume, favorable product mix, benefit from cost reduction measures, and reduction in costs per vehicle on account of increased production, offset partially by increased research and development expenses and unfavorable currency translation effects.