GM Starts Record 1.46 Million China Recall Since Tougher Law

Dec 29, 2013 11:44 pm ET

(Updates with share price in fifth paragraph.)

Dec. 30 (Bloomberg) -- General Motors Co.’s Chinese joint venture will recall 1.46 million cars to replace defective fuel- pump brackets in China’s biggest call back since a new law broadening manufacturer liability came into force.

Shanghai General Motors Co., GM’s passenger-car venture with SAIC Motor Corp., is recalling 1.22 million Buick Excelle and 243,297 Chevrolet Sail cars starting today, China’s General Administration of Quality Supervision said on its website. A Buick dealership owned by Beijing Capital Group Co. estimates replacement costs at about 900 yuan ($150) to 1,000 yuan for each Excelle. GM didn’t immediately respond to an e-mailed request for comment.

China is stepping up protection for consumers as automakers from GM to Volkswagen AG seek to expand sales in the world’s largest auto market. The new law, which came into force this year, allows the government to order investigations and impose fines should manufacturers and importers fail to recall faulty vehicles in a timely manner. A separate rule mandating minimum standards for warranties took effect from October.

“Even though it is a big recall, it won’t have that much of impact on the automaker given that component makers usually pay the majority of costs if they supplied faulty parts,” said Han Weiqi, an analyst with CSC International Holdings Ltd. in Shanghai. “GM has established its brand image in China and the recall is unlikely to undermine their appeal to car buyers, especially when there are no casualties involved.”

Record Recalls

SAIC Motor rose 1.4 percent to 14.07 yuan as of the 11:30 a.m. trading break in Shanghai. The benchmark Shanghai Composite Index was little changed.

A total of 3.76 million vehicles have been recalled in China as of Dec. 24, on track for an annual record, according to the quality supervision administration.

Volkswagen recalled 384,181 vehicles in China in March to replace defective gearboxes. Europe’s largest automaker issued another recall in November, involving 2.64 million vehicles globally, to fix electronic and drive-system flaws.

GM’s recall involves Buick Excelle vehicles produced from Jan. 17, 2006 to Dec. 2, 2011, while the Chevrolet Sail cars were made from April 9, 2009 to Oct. 8, 2011, according to the statement. The defective bracket may crack after prolonged use, leading to fuel leaks in extreme cases, according to the statement.

Both GM and Volkswagen have sold more than 3 million vehicles this year in China.

--Tian Ying. Editors: Chua Kong Ho, Lena Lee