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Auto Recall Blues Continue: Toyota, Ford & Others in Focus

Zacks

Recalls are rampant in the auto industry across the globe, with a steep rise noticed in recent years. A recall is issued when a vehicle or its parts do not comply with the stipulated safety standards or poses safety risks to passengers.

In the event of a recall, manufacturers are required to sort out the problem through repair, replacement and refund or in extreme cases repurchase of the faulty vehicle. Recall has become a serious issue, with frequent cases hogging attention recently due to hatchback problems, risk of fire, brake-related concerns 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 several top-notch auto players such as Toyota Motor Corporation TM, Fiat Chrysler Automobiles N.V. FCAU, Volkswagen AG VLKAY, Daimler AG DDAIF and Ford Motor Company F.

In the first week of September, Japanese auto major Toyota announced a global recall of more than 1 million of Prius and C-HR compact crossover cars, per Bloomberg. The affected vehicles have the risk of catching fire. Again, in late August, Fiat Chrysler made the announcement that it will recall approximately 209,000 units of sports utility vehicle (SUV) and minivan, globally, per AP. The recall was issued to fix a braking problem for which vehicles can take longer distances to stop.

Adding to the woes of the industry, again, in August, it was reported that Volkswagen’s Mexican unit issued a recall notice for a small number of 2018 Golf R vehicles. This German automaker had to take the decision to recall as a possible problem with seat head cropped up. Further, it was reported that Daimler’s Mercedes-Benz is recalling more than 9,000 of 2018 GLE and GLS SUVs due to a problem pertaining to brake. According to the National Highway Traffic Safety Administration (NHTSA), the rear brakes of the vehicles might not engage fully because of a faulty part.

The latest addition to the recall trouble is Ford, the second-largest U.S. automaker. This auto giant has issued a recall for nearly 2 million F-150 pickup trucks due to a seat belt defect that could result in a vehicle fire. Notably, F-150 is the best-selling vehicle in the United States.

Conclusion

If auto manufacturers start believing that they have achieved the peak of quality just because there has been a significant decline in cases of car crash, they need deep introspection. The reports of frequent recalls of a huge number of vehicles on various grounds such as faulty airbags, electrical wiring, seat belts, etc. indicate widespread failure of quality and safety issues.

Among the stocks discussed above, Toyota, Fiat Chrysler and Volkswagen each currently carries a Zacks Rank #3 (Hold). Daimler and Ford presently carry a Zacks Rank #4 (Sell) and Zacks Rank #5 (Strong Sell), respectively.

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

Daimler, Ford, Volkswagen, Toyota and Fiat Chrysler have an expected long-term growth rate of 2.8%, 5.3%, 5.9%, 6% and 25.3%, respectively.

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