U.S. Markets closed

General Motors Recalls Compact Cars

Zacks Equity Research

General Motors Co. (GM) announced the recall of 778,562 Chevrolet Cobalt and Pontiac G5 compact cars of model years 2005 to 2007 in North America. The recall is being made to fix faulty ignition switches which may lead to sudden shutdown of the engine, leading to near-fatal crashes.

According to General Motors, a heavy key ring or uneven roads can cause the ignition switch to shift away from the run position, thus turning off the engine and electrical power. In such a situation, the front air bags will not be deployed in case of a crash.

There have been reports of five frontal-impact crashes and six front-seat fatalities caused by collisions due to this problem. All the crashes occurred off-road at high speeds. General Motors also reported that some of the drivers were intoxicated and were not wearing seat belts. There are reports of 17 other crashes which had some frontal crash impact and non-fatal injuries.

Among the recalled cars, 619,122 were sold in the U.S., 153,310 were sold in Canada and 6,130 vehicles were sold in Mexico. General Motors announced that it will replace the ignition switch for free.

General Motors is a leading global automotive company and has operations in almost 120 countries and facilities in 30 countries. It currently holds a Zacks Rank #5 (Strong Sell).

General Motors’s rival Ford Motor Co. (F) recalled 13,493 Edge SUVs in China last month to repair defective fuel systems. Inferior quality of the fuel pulsation damper used in the vehicles could lead to cracks resulting in fuel leakage. This could eventually lead to fire. Ford also recalled 27,933 Edge crossover vehicles of model years 2012 and 2013 in the U.S. for the same reason.

Some better-ranked automobile stocks worth considering are Tesla Motors, Inc. (TSLA) and Dongfeng Motor Group Company Ltd. (DNFGY). Tesla sports a Zacks Rank #1 (Strong Buy), while Dongfeng carries a Zacks Rank #2 (Buy).

Read the Full Research Report on F
Read the Full Research Report on GM
Read the Full Research Report on TSLA
Read the Full Research Report on DNFGY

Zacks Investment Research