GM Probes Cruze Cars for Possible Recall of Takata Air Bags

Jun 26, 2014 4:17 pm ET

(Updates with closing GM share price in final paragraph.)

June 26 (Bloomberg) -- General Motors Co., which already has recalled a record number of vehicles in the U.S. this year, may now need to fix its top-selling Chevrolet Cruze for a new type of air-bag problem.

About 33,000 vehicles may have received potentially faulty air-bag modules supplied by Japan’s Takata Corp., Jim Cain, a GM spokesman, said yesterday. Detroit-based GM ordered Chevrolet dealers this week to stop selling 2013 and 2014 Cruze small cars because air-bag modules may have an incorrect part. That order was lifted late yesterday after the specific vehicles were identified. GM is working on a likely recall of those cars, according to a person familiar with the process who spoke on the condition of anonymity.

Takata, a Tokyo-based supplier, made air bags that led to millions of vehicle recalls by automakers including Honda Motor Co. and Toyota Motor Corp. Honda, for example, has said its recall was for flaws related to inadequate pressure and excess moisture. GM’s problems are different, Cain said.

“We are working to resolve a mechanical issue,” he said in an e-mail.

GM’s stop-sale order conflates two of the largest recall issues in the global automotive industry this year and threatened to expand the automaker’s recall crisis to its most popular car while further exposing the Japanese supplier to more unsatisfied automakers, also known as original equipment manufacturers, or OEMs.

‘Perfect Storm’

“This is exactly the perfect storm when you have two companies the size of General Motors and Takata, which has supplied multiple OEMs, having massive recalls,” Dennis Virag, president Automotive Consulting Group, said in a telephone interview. “It’s just a situation that is beyond comprehension.”

GM has redoubled efforts to ensure its vehicles are safe following the slow recall of 2.59 million compact cars linked to at least 13 deaths. GM said it has recalled 20 million in North America through June 16, including 17.7 million in the U.S.

The company’s crisis erupted in February with the recall of some small cars it no longer sells, including the Chevrolet Cobalt, that have a defective ignition switch that could be jarred into the “accessory” position, disabling power steering and preventing air bags from deploying.

‘Big Problem’

“In the manufacturing industry, all kinds of problems can happen, but what’s important is you deal with it seriously when you have a problem like this,” said Satoshi Okumoto, chief executive officer of Fukoku Capital Management Inc. in Tokyo. “If it’s just a simple mistake, it may not be a big issue but if there are wrongdoings that companies normally don’t have, then it could be a big problem.”

Takata can’t comment amid an investigation, though it apologizes for concerns it caused customers, said Toyohiro Hishikawa, a Takata spokesman in Tokyo.

GM hasn’t said whether it will recall the Cruzes or recommend that owners not drive them. U.S. sales of the car rose 4.4 percent last year to 248,224, according to researcher Autodata Corp.

“We are working through all of the issues associated with the part in real time, and we will move as quickly as possible as we stitch the facts together,” the company said.

GM shares fell 0.5 percent to $36.90 in at the close in New York. They have increased 3.8 percent since Feb. 12, the day before the small-car recalls began. Takata shares fell 0.7 percent to 2,163 yen in Tokyo trading, extending this year’s drop to 28 percent.

--With assistance from Patrick McHale in New York, Masatsugu Horie in Osaka and Ma Jie and Yuki Hagiwara in Tokyo.