STOCKHOLM, 23 Jan 2019:
Volvo Cars, which is owned by China’s Zhejiang Geely Holding Group, is voluntarily recalling about 200,000 cars after it found an engineering issue that could potentially cause fuel leakage in the engine compartment over time.
The group said its probe had identified that some vehicles may have small cracks inside one of the fuel lines in the engine compartment – which, along with a pressurised fuel system, may over time lead to fuel leakage in the engine compartment.
About 219,000 cars of 11 different models produced in 2015 and 2016 had been affected, the Swedish company said – with the highest number of impacted cars in Sweden, the UK and Germany. The Swedish recall was first reported by daily Aftonbladet.
Volvo sold 503,127 cars in 2015 and 534,332 cars in 2016.
“There are no reports alleging injuries or damages related to this issue. Volvo preventatively recalls the cars to avert any possible future problems,” Volvo said in its statement.
The company’s fortunes have been revived since Geely bought it in 2010 and its popular new premium models now compete with larger rivals Daimler and Volkswagen. It sold a record 642,253 cars in 2018.
However, a prolonged US-China trade war has inflated raw materials costs and resulted in a slowdown in Chinese demand for cars. That has forced Volvo to spend to retool its global factories to limit the negative tariff impact and led it to postpone its plans to go public indefinitely.
This month, Geely Automobile, the main listed unit of the Geely empire which owns Volvo, forecast flat sales this year, as China’s most successful carmaker struggles with slowing economic growth and more cautious consumers. Geely also owns Malaysian car label Proton and UK-based Lotus.
A Volvo spokesman declined to comment today on the cost of the latest recall. The company made its largest recall ever in 2004 – when it called back 460,000 cars to fix wiring in an electronic control module for the cars’ main cooling fan.
In TOKYO, Subaru Corp said its sole car factory in Japan – accounting for roughly 60% of global production – could be out of action for almost two weeks after it discovered a suspected defect in a power-steering component.
It also announced plans to restart production on Monday at the earliest. The production stoppage, which started from the night shift on Jan 16 at one of Subaru’s only two factories worldwide, was first reported in the Asahi newspaper today.
The possible defect affected the Forester, Impreza, and XV models, the automaker said. Production of all other models had also stopped because they are built on the same assembly line, it said.
“Based on the contribution margin per vehicle, we estimate that a complete shutdown of Japanese production lines for one week would dent operating profits by ¥13.5 billion (US$123 million),” Nomura Securities analyst Masataka Kunugimoto said.
Subaru is already reeling from stagnant sales growth in the US and fresh recalls in Japan due to inspection cheating. In November, it slashed its profit forecast by a quarter citing rising recall costs.
The company said it did not yet know what impact the production halt would have on its earnings, which are already on track for a third-straight annual drop.
The Asahi newspaper said the impact on production so far likely exceeded 10,000 units, and that delays were starting to be seen in delivery to customers.
Subaru said the cause of the potential defect was still unknown. It declined to comment on why the problem was not disclosed earlier.
Vehicles with the possible defect were produced between late December and Jan 16, and “appropriate” steps would be taken to ensure the safety of those cars, it added without elaborating.
The automaker said it was investigating whether its US plant had been affected, although production was continuing there for the time being. Subaru counts on the US for more than 60% of global vehicle sales.
A day before the stoppage, Subaru said it planned to build 650,000 vehicles in Japan and 1.03 million globally this year, up 1% on the previous year.
It has forecast record global sales of 1.08 million vehicles, of which 700,000 are expected to come from the profitable US market.
Nomura Securities’ Kunugimoto said that while the stoppage could impact this year’s results, he maintained his forecast for a strong recovery from the next fiscal year.
Subaru’s last major production shutdown occurred after the Great Tohoku earthquake in 2011 due to power outages and supply chain disruptions.
– Reuters