Tag Archive | "Reuters"

Recalled Cars Create A Costly Problem for U.S. Auto Dealers

Honda Motor Co’s order that its U.S. dealers stop selling some 2.2 million of the automakers’ most popular models is compounding financial and regulatory headaches for car dealers stuck with millions of vehicles that have potentially hazardous air bags or other safety defects, reports Reuters

With the recalls affecting Honda vehicles dating back several years, used-car dealers are facing increased pressure. It is legal under federal law to sell used cars with unrepaired safety defects that are subject to recall, but dealers that operate under franchises with manufacturers could be violating those agreements.

It is illegal to sell new cars that are subject to a recall under federal law.

Because some used-car dealers operate independently of any manufacturer, the growing number of used cars that need safety repairs is creating divisions among dealers. The National Highway Traffic Safety Administration says this difference creates a “safety loophole.”

John Isaacson, a Honda dealer in Auburn, Maine, said he was hit by three recalls the same day, but would respect Honda’s ban. “If people are selling these with open recalls, customers get mad,” Isaacson told Reuters. “Over time, it’s not good for business.”

Regulators have taken steps to address sales of used cars subject to safety recalls.

In a settlement last month with General Motors Co and two dealer groups, the Federal Trade Commission warned automakers and dealers not to claim that used vehicles sold as “certified pre-owned” cars had undergone comprehensive inspections if repairs required under a recall had not been done.

“Companies touting the comprehensiveness of their vehicle inspections need to be straight with consumers about safety-related recalls,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said in a statement.

As in Honda’s case, manufacturers sometimes issue a “stop sale” on models subject to recall and can penalize their franchise dealers if they sell such cars.

The head of the California New Car Dealers Association, Brian Maas, said one of his members had 15 percent of his inventory affected by the Honda recall.

However, dealers outside the new vehicle franchise system, whether independents or chains such as CarMax, the largest U.S. used-car retailer, can sell such cars.

AutoNation Inc, the largest new vehicle dealer group in the United States, has said it will not sell a new or used vehicle that needed repairs under a recall, and Chief Executive Mike Jackson is calling on rivals to do likewise.

In the meantime, Jackson told Reuters, the policy is proving costly, in part because the chain has to stock more vehicles to make up for the roughly 16 percent of inventory it cannot sell.

AutoNation, with its huge network of dealerships, can “afford to do the right thing,” said Kelley Blue Book analyst Rebecca Lindland. Smaller dealers need to turn cars quickly and cannot afford dead inventory.

Honda has said parts to repair the Takata airbags will not be ready until late summer.

CarMax says it is transparent about recalls on its used cars, including a link on each car’s listing on the website to search for open recalls. Carmakers do not allow CarMax to perform recall repairs, so customers are “best positioned” to get repairs at franchised dealers after purchase, the company says.

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U.S. safety regulators open probe of GM’s handling of recall

(Reuters) – U.S. safety regulators have opened an investigation into whether General Motors Co. reacted fast enough in its recall of more than 1.6 million cars over an ignition-switch defect linked to 13 deaths in crashes.

“The National Highway Traffic Safety Administration has opened an investigation into the timeliness of General Motors’ recall of faulty ignition switches to determine whether GM properly followed the legal processes and requirements for reporting recalls,” the safety agency said in a statement released Wednesday.

GM could face a maximum fine of $35 million if it failed to notify NHTSA within five days of a recall after learning of a vehicle safety defect.

The recall was to correct a condition that may allow the engine and other components including front airbags to be unintentionally turned off.

The Detroit company previously said the weight on the key ring, road conditions or some other jarring event may cause the ignition switch to move out of the “run” position, turning off the engine and most of the car’s electrical components.

NHTSA urged owners to follow GM’s recommendation to “use only the ignition key with nothing else on the key ring” when operating the vehicle and seek the repair as soon as replacement parts become available. NHTSA said it will monitor the recall and take additional action as needed.

On Tuesday GM more than doubled its recall related to the issue, saying it was “deeply sorry” and that the company was reviewing its recall process, acknowledging it was not as “robust as it should have been. GM said then that it was aware of 31 reported incidents, including 13 front-seat fatalities, involving frontal crashes in which the condition may have caused or contributed to the front airbags not deploying.

Earlier this month, GM said it was recalling 778,562 Chevrolet Cobalt and Pontiac G5 compact cars from model years 2005 through 2007. On Tuesday, it added 842,103 Saturn Ion compact cars from 2003 through 2007 model years, Chevy HHR mid-sized vehicles from 2006 and 2007, and the Pontiac Solstice and Saturn Sky sports cars from 2006 and 2007.

GM no longer makes any of the affected cars. It previously said it is working with suppliers to increase production of replacement parts and accelerate the process. Dealers will replace the ignition switch at no charge.

GM said the ignition switch torque performance may not meet company specifications. The involved parts were made in Mexico, according to documents previously filed with the U.S. National Highway Traffic Safety Administration.

Of the cars recalled, 1,367,146 vehicles are in the United States, 235,855 are in Canada, 15,073 are in Mexico and 2,591 were exported outside North America, according to GM.

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January Auto Sales Yo-Yo from Brand to Brand

(Reuters) – U.S. automakers Ford Motor Co. and General Motors Co. saw January auto sales plummet, missing analysts’ estimates for the month. But early sales results were mixed for other companies and brands, with Chrysler Group, a unit of Fiat Chrysler Automobiles, and Nissan North America reporting increases and topping analysts’ estimates, while Toyota Motor Sales USA missed on a year-to-year decline.

There was little consistency in the initial sales reports. GM estimated industry sales in January were at a seasonally adjusted annual rate of 15.3 million.

GM, Ford and Toyota, the top three U.S. sellers, all blamed bad weather for poor performances.

Ford said company sales fell 7.1 percent to 154,644. Analysts polled by Reuters had projected 157,441. Ford brand sales dropped 8.4 percent, with declines in such popular models as the Fusion mid-size sedan and the F-Series full-size pickup. But Lincoln brand sales jumped 42.5 percent, on the strength of the MKZ sedan and the MKX crossover.

GM sales dropped 11.9 percent to 171,486, compared with analysts’ average projection of 187,782. All four of GM’s U.S. brands saw January sales decline.

Chrysler Group’s U.S. January sales rose 8 percent to 127,183, bolstered by increases at its Jeep and Ram truck brands.

Nissan said sales climbed 11.8 percent to 90,470, above analysts’ consensus estimate of 88,744. Sales were driven in part by the Altima mid-size sedan, which beat the Ford Fusion and sold twice as many as the Chevrolet Malibu.

Toyota’s January sales fell 7.2 percent to 146,365, missing analysts’ estimate of 153,003.

Volkswagen of America saw January sales plunge 19.0 percent to 23,494, as its three top sellers – the Golf and Jetta compacts and the mid-size Passat sedan – all fell from a year earlier.

While snow and bone-chilling weather likely hurt total U.S. auto sales for the month, analysts said any dip in monthly sales shouldn’t cut into the automotive industry’s months’ long rebound, which has been outpacing the recovery of the overall U.S. economy since the 2008-2010 downturn.

Thirty-seven economists polled by Thomson Reuters expect the industry’s annual selling rate of light vehicles in January to finish at 15.7 million vehicles. The range of economists’ forecasts were 15 million vehicles to 16 million vehicles.

In January 2013, the industry’s annual sales rate was 15.23 million vehicles.

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Toyota Alerts U.S. Safety Board to Issue That Could Result in Recall

(Reuters) – Toyota Motor Corp. alerted U.S. safety officials about seat material in several vehicles that does not meet fire retardation standards, which could result in a recall depending on what the safety agency decides.

The Japanese automaker said on Thursday it had stopped selling several models in North America equipped with seat heaters made since August 2012 after being alerted by South Korean safety officials that material in the part did not meet fire retardation standards also used in the United States. The cars are built in United States and some are exported to Korea.

Toyota spokesman John Hanson said the company had informed the U.S. National Highway Traffic Safety Administration (NHTSA) of the issue and would file an official report later on Thursday outlining the non-compliance with the standard. He added that Toyota did not feel a recall was necessary. “We don’t believe that it is a defect issue or a safety-related issue because there has been no occurrence of any problems out in the real world,” Hanson said.

There have been no reports of accidents, fires or injuries related to the issue in the affected vehicles in the United States, Canada or Mexico, he said. The NHTSA will make the final determination on whether a recall is needed, and Hanson said he did not know the timeline for that decision. Toyota does not know yet how many cars are affected by the issue, he said.

NHTSA officials could not immediately be reached to comment.

Toyota dealers have been told to stop selling any of the affected vehicles until the part can be replaced, Hanson said. The automaker will handle requests by individual owners to replace the part at no cost on a case-by-case basis.

Affected vehicles are the Camry sedan, Camry hybrid, Avalon sedan, Avalon hybrid, Corolla subcompact, Sienna minivan and Tundra and Tacoma pickup trucks equipped with seat heaters that were sold since August 2012, when the fabric supplier was changed, he said.

Toyota found out about the issue when it was notified that the seat heater did not pass a test conducted by the Korean Automotive Test and Research Institute (KATRI), which uses the same standard as NHTSA, Hanson said.

The Korean agency found that the material in the seat heater does not meet standards that require it to retard a flame across the material surface at a specified rate, he said. KATRI notified Toyota of the failed compliance.

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Moody’s Considers Fiat Downgrade After Chrysler Purchase

Milan – Moody’s placed the Ba3 rating of Fiat under review for a possible downgrade to reflect the impact on the Italian car maker’s cash position of its plans to take full control of Chrysler Group LLC.

“The announced acquisition will materially weaken Fiat’s liquidity position at a time when the company is still free cash flow negative,” credit ratings agency Moody’s senior vice president and lead Fiat analyst Falk Frey said in a statement.

On Jan. 1 Fiat struck a $4.35 billion deal to buy the 41.46 percent stake in Chrysler it does not already own from a retiree healthcare trust affiliated with the United Auto Workers union. The deal, which is expected to close on or before Jan. 20, will facilitate further integration of the financial and operating strategies of the two car groups, Moody’s said.

With European car sales suffering, Chrysler is a source of profit for Fiat but the two companies currently are forced to manage their finances separately. But Moody’s said Fiat’s remaining cash, its unused credit facilities and its operating cash flow should be enough to meet its cash needs this year.

Fiat issued a statement saying Moody’s had put its rating under review for a possible downgrade. When called by Reuters, a Fiat spokesman declined to comment further.

Moody’s also said it would be looking at the impact of rising challenges in Latin America on the Italian carmaker’s ability to generate cash.

Fiat’s performance in Brazil, its most profitable foreign market, has worsened considerably since 2011 due to increased competition. “Fiat’s ability to compensate for the sluggish demand in Italy has diminished further,” it said.

On Thursday Fitch Ratings said the deal to buy the Chrysler stake had no immediate impact on Fiat’s ratings, adding that a full rating review would be conducted in early 2014.

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UAW Wants to Eliminate Two-Tier Wage System

(Reuters) – A top official with the United Auto Workers said the American labor union wants to eliminate the two-tier wage system that pays new automotive workers at a lower rate than veterans.

Norwood Jewell, nominated to serve as one of three vice presidents when the union meets next June to ratify its new leaders, said that the UAW wants to dump the two-tier scale that pays entry-level hires at slightly more than half the rate of veteran workers.

“The international executive board hates two-tiers,” he told reporters at a General Motors Co plant in Flint, Michigan. Jewell is currently director of the region that includes the GM plant. “We didn’t do two tiers because it’s a wonderful thing,” he added, saying they were a “financial unfortunate” caused by the weak industry in 2007. “We hate them. We intend to eliminate them over time.”

The UAW will negotiate its next labor contract with the U.S. automakers, GM, Ford Motor Co. and Chrysler Group, which is controlled by Italy’s Fiat, in 2015. Strong profits at the U.S. automakers, combined with the UAW’s distaste for two-tier wages and the fact that veteran workers have not received a pay raise in a decade, point to difficult labor talks.

The American automakers have said they need the entry-level wage scale to compete on labor costs with Japanese, South Korean and German automakers that have U.S. plants.

Pay of hourly workers at the entry level starts at just under $16 an hour and rises over time to more than $19. Veteran workers are paid just more than $28 an hour.

About 16 percent of GM’s 51,500 hourly U.S. employees are second-tier workers, while 19 percent of Ford’s 46,500 hourly workers are paid at that level. About a quarter of Chrysler’s 32,000 hourly workers are entry-level.

Jewell said key to eliminating the second-tier wages will be the UAW successfully organizing non-union plants in the U.S. South. “If we don’t organize them and bring them up to our standard, we’re never going be able to totally eliminate the second tier,” he said.

The UAW has been negotiating to organize Volkswagen AG’s assembly plant in Chattanooga, Tennessee, through a German-style labor council.

Asked whether the union expects to recoup some of the givebacks it made in the last round of talks in 2011 with the now-profitable U.S. automakers, Jewell said a strong economy would help the union’s case in the next contract negotiations.

Jewell also said he expects the union’s strong relations with GM to continue even as the No. 1 U.S. automaker transitions to a new chief executive next month. Last week, GM said CEO Dan Akerson would be replaced by product development chief Mary Barra, the industry’s first woman CEO.

He also noted that any move to raise union dues would be decided by the membership at the convention next June. The UAW is considering hiking membership dues by 25 percent, the first increase since 1967, as it faces dwindling membership and rising costs, sources and a union official said this month. Jimmy Settles, UAW vice president and the top union official for workers at Ford said the increase was only in the discussion phase and no decision had been made.

The UAW has faced dwindling membership since 1979, when U.S. automakers dominated the domestic car market and before the widespread use of robots and other manufacturing efficiencies cut the need for as many assembly line workers.

UAW membership sunk to 355,191 in 2009 at the depths of the U.S. recession but while U.S. auto sales have increased nearly 50 percent since then, union membership has risen 8 percent.

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