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General Motors (GM) to Recall 6M Vehicles for Takata Airbag Issue

By Zacks Investment ResearchStock MarketsNov 25, 2020 06:40AM ET
General Motors (GM) to Recall 6M Vehicles for Takata Airbag Issue
By Zacks Investment Research   |  Nov 25, 2020 06:40AM ET
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General Motors GM is set to recall around 6 million trucks and sports utility vehicles (SUVs) to replace defective Takata airbag inflators. The U.S. auto giant’s decision to recall comes after the the National Highway Traffic Safety Administration (“NHTSA”) denied the firm’s petition to avoid the callback.

The Ruling

It has taken NHTSA four years to arrive at the decision that the Takata inflators equipped in General Motors’ vehicles are at a potential risk to explode after prolonged exposure to heat and humidity, same as the other recalled Takata inflators by various automakers.

While General Motors has been contending that the airbag inflators in question does not pose a safety risk but the company would still abide by NHTSA’s ruling and start taking necessary measures. The agency has given the automaker a 30-day time period to come up with a plan on how it would work toward fixing the recall.

The recall would come at a huge price and is expected to cost the firm around $1.2 billion. Affected vehicles include some of the best-selling models of General Motors — including Cadillac Escalade SUVs, GMC Sierra and Chevrolet Silverado pickups, GMC Yukon and Yukon XL SUVs, Chevrolet Tahoe and Suburban SUVs — manufactured between 2007 and 2014.

Takata Airbag Scandal Overview

The Takata inflator saga has triggered massive recalls by various auto biggies including Toyota TM, Honda HMC and Ford F. Notably, Takata used ammonium nitrate to create small explosions to inflate the airbags. However, the chemical can deteriorate over time due to fluctuating temperatures and high humidity. It can burn too fast and blow apart a metal container, hurling shrapnel into drivers and passengers. At least 26 people have been killed worldwide by injuries inflicted by the defective Takata airbag inflators. The Takata scandal —which is by far the largest automotive safety recall in the U.S. history — has resulted in the recall of more than 63 million vehicles in the United States.

GM Shares Rise to 52-Week High Despite Recall News

The recall news failed to shake investors’ confidence in the stock, which scaled to a 52-week high of $46.71 yesterday, before retracting to close at $46.46. In fact, over the past six months, shares of General Motors have rallied nearly 70%. The company’s aggressive electrification strategy is driving the stock.

The automaker aims to spend more than $20 billion through 2025 to launch gen-next electric vehicles powered by new-low cost batteries. By 2025, General Motors plans to roll out 30 electric vehicles globally, more than two-thirds of which will be available in North America. The vehicles will encompass the company’s entire brand portfolio — including Cadillac, Buick, GMC, and Chevrolet — in a range of prices.The auto giant’s Ultium Drive’ system will aid the company in transitioning to a fully-electric lineup down the road. Its next-generation EVs (from small electric cars to electric pickup trucks) will be powered by Ultium Drive, which will not only boost General Motors’ manufacturing efficiencies but also enhance the performance and range of its future vehicles. Collaborations with Honda and EVgo are likely to scale up its e-mobility prowess. General Motors currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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General Motors (GM) to Recall 6M Vehicles for Takata Airbag Issue

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General Motors (GM) to Recall 6M Vehicles for Takata Airbag Issue

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