Honda Motor Co. (HMC) plans to recall 962,000 cars globally in order to fix a problem with their power windows and computer systems. The recall involves 936,000 units of Fit and CR-V (including 80,111 units in the U.S.) and 26,000 units of CR-Z compact hybrids (including 5,626 units in the U.S.). No injuries have been reported related to either of the problems.
Honda detected a design flaw in the Fit and CR-V line-ups that allows residue from window cleaners to accumulate, which can degrade the electrical contacts of the power windows’ switch over time and lead to fire. The automaker intends to replace the master switch for the cars’ power windows.
The company has recalled both the line-ups in North America, Asia, Europe and Africa. The Fit is known as Jazz in some markets, while the Fit Aria is known as City in India.
On the other hand, the company has detected a software bug with the manual transmission in the CR-Z line-ups that causes the motor to rotate in the opposite direction from the transmission’s gear under some conditions. This could make the car roll backwards when the transmission is in forward gear. Honda plans to fix the problem by upgrading the software.
Automotive safety recalls were brought into focus by the media after Toyota Motors’ (TM”>TM) announcement of the largest-ever global recall of about 11 million vehicles since September last year. The automaker made more than 15 recalls, greater than any other automaker. They were related to problems associated with faulty accelerator gas pedals, slipping floor mats and defective braking systems.
In 2011 till date, Honda’s largest recall included 1.5 million cars in the U.S. due to a problem with the transmission system. The recall included CR-V (model year 2007-2010), Elements (2005-08) and Accords with 4-cylinder engines (2004-10).
Apart from vehicle recalls, Honda has been struggling with lower sales and profits, adverse impact from the earthquake and tsunami in Japan and a recent and harsh Consumer Reports' review of its popular Civic compact car.
Honda, a Zacks #4 Rank (Sell) stock, posted a sharp 88.3% fall in profit to ¥31.8 billion ($394 million) or ¥17.64 per share (22 cents per share) in the first quarter of its fiscal year ended March 31, 2012 from ¥272.49 billion or ¥150.27 per share in the same quarter of the prior fiscal year. The decline in profit was attributable to the adverse impact from the earthquake and tsunami in Japan on March 11 and unfavorable currency translation effects.
Consolidated net sales and other operating revenues dipped 27.4% to ¥1.71 trillion ($21.24 billion) on the back of same factors outlined above, despite increased revenues in the motorcycle business. However, at constant exchange rates, revenues decreased 22.7% from the prior year.
Consolidated operating profit plummeted 90.4% to ¥22.6 billion ($280 million) from ¥234.44 billion due to lower sales volume and model mix, increase in fixed cost per unit as production has reduced and the unfavorable foreign currency effect, despite a fall in selling, general and administrative expenses.
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