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A recent safety recall from
breaks the mold in that the company that made the part involved doesn’t think it needed to be recalled, setting up a potential fight over who has to pay.
Over the weekend, a recall notice was posted to the National Highway Traffic Safety Administration’s website affecting almost one million vehicles produced by GM (ticker: GM) between 2014 and 2017. The issue listed: The driver’s side air-bag inflater may explode during deployment “due to a manufacturing defect,” according to NHTSA. Dealers will replace the inflater free of charge.
NHTSA has also requested that the manufacturer of the part, ARC Automotive, recall 67 million of the inflaters made before January 2018, according to The Wall Street Journal.
Recalls are fairly common, so they don’t tend to affect stock prices unless they are large and cost an unusual amount of money to resolve. Top U.S. auto makers have recalled some eight million vehicles in more than 100 separate actions in 2023.
GM has eight, affecting more than 1.2 million vehicles, while
(TSLA) has five recalls affecting almost 400,000 vehicles.
(F) has announced the most recalls so far in 2023: 21, involving about 2.2 million units.
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GM stock was down about 0.5% in morning trading, while the
and
were off by about 0.1% and 0.2%, respectively.
Still, investors should pay attention because ARC doesn’t believe there is a problem and doesn’t want to recall up to 67 million air bags. A letter from the company to the NHTSA said it didn’t agree with the agency’s “tentative conclusion” that the inflaters, made in the 18 years before January 2018, are defective.
The NHTSA, ARC, and GM didn’t immediately respond to requests for comments, but GM is recalling the vehicles. It isn’t clear who will pay. A further complication is that
(ALV) manufactured some ARC inflaters under a license agreement. Its shares were down 1.1%.
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If it turns out to be GM, the expense likely won’t be detectable within its overall financial reports, given the size of the company. ARC is privately held; air bags appear to be its primary business.
Some other car makers—
(
BMW
.
Germany),
gen (VOW.Germany) and
(F)—have already recalled vehicles containing the inflaters. Those recalls came between 2017 and 2022 and affected less than 10,000 units.
Investors should follow the issue to see how large it gets, how much it costs, and who ends up paying.
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The situation is clearer for GM owners with cars that have been affected. All they have to do is to take the car to the dealer.
Write to Al Root at allen.root@dowjones.com
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