Recalls and capital deployment ruled the headlines in the auto sector over the last week. The biggest news was Takata Corp's (OTC:TKTDY) acknowledgement of defect in 33.8 million airbags. This will result in the largest safety recall in the U.S. Meanwhile, Honda Motor Company Ltd. (NYSE:HMC) announced two recalls last week, one for these airbags and another for software update.
Coming to the positives, General Motors Co (NYSE:GM) announced plans to invest $1 billion in its Warren Technical Center while Lear Corporation (NYSE:LEA) announced that it will open a new automotive plant in Macedonia. Also, Thor Industries (NYSE:THO) announced a repurchase agreement for 1 million shares.
(Read last to last week’s recap here: Auto Stock Roundup for May 14, 2015)
Recap of the Week’s Most Important Stories
1. Takata Corp. has relented under pressure from U.S. regulators and has declared 33.8 million of its airbags as defective. This will nearly double the number of vehicles recalled due to faulty airbags, marking the largest auto recall in the U.S. The news comes close behind last week’s expansion of recalls by Honda, Toyota Motor Corp. (NYSE:TM) and Nissan Motor (OTC:NSANY). The Takata airbags have faulty inflators due to which these can explode and shoot out metal fragments when deployed.
2. General Motors announced plans to invest $1 billion in its Warren Technical Center campus. The company will utilize this investment for the construction of new Design studios and a parking deck for Design employees; rebuilding and renovation of some of the existing research & development facilities; building of a multi-storied IT building adjoining the current Michigan IT Innovation Center and a new parking deck for the Innovation Center’s employees.
The work is slated to begin this month and be over by 2018. General Motors anticipates that this investment will make the Tech Center a more advanced and efficient workplace. The investment will eventually help in improving its products and thus, benefit customers (read more: General Motors to Invest $1B in Warren Tech Center).
3. Lear Corp. announced that it will open a new automotive plant in Gostivar, Macedonia, this summer. This is Lear’s first facility in Macedonia. The plant will employ around 300 people and will be used for the production of seat covers (read more: Lear Corp. to Open Automotive Plant in Macedonia).
4. Thor Industries announced its repurchase agreement with The Thompson Family Foundation. The agreement, dated May 15, involved a private transaction for the repurchase of 1 million shares of Thor Industries. These shares of Thor Industries were bought back at $60 a piece, resulting in a total purchase consideration of $60 million. The company used its available cash balance for the repurchase (read more: Thor Industries Buys Back 1M Shares in Private Transaction).
5. Honda announced two recalls last week. The company is recalling 11,381 vehicles in India in order to replace the faulty airbags in them. Additionally, Honda’s Acura brand is recalling 19,500 MDX and RLX vehicles of model years 2014 and 2015 in the U.S. to update the software (read more: Honda to Recall 19,500 Acura Vehicles for Software Glitch).
Performance
Most auto stocks recorded small price changes over the last week, the majority of which were on the positive side. Toyota gained the maximum, while Ford Motor (NYSE:F) lost the most in the last week.
Meanwhile, Harley-Davidson lost the maximum in the six months, largely due to the plunge in its share price following its earnings release on Apr 21. AutoZone (NYSE:AZO) continued to hold on to its position as the biggest gainer over the last six months.
What’s Next in the Auto Space?
Advance Auto Parts is scheduled to report first-quarter 2015 financial results today. AutoZone will report fiscal third quarter (ended May 9, 2015) results on May 26, 2015.