Honda Motor Co. (HMC, Financial) struggled to maintain momentum on Wednesday, falling over 1% by mid-morning. The automaker is under pressure following airbag recalls and the potential Brexit custom expenses that are expected to cost automakers tens of millions of dollars.
Automakers, including Ford (F, Financial) and Honda, have submitted evidence to parliament explaining the impact leaving the European Union will have on the industry.
The manufacturers, along with the industry lobby group SMMT, state that annual running costs will be increased significantly due to greater impacts on tariffs. Honda specifically claims the tariffs, which may be as much as 10%, will be impossible for the company to absorb.
Production in Britain's auto industry reached a 17-year high in 2016, but automakers are still concerned over tariffs.
"A 10 percent tariff would make our vehicles uncompetitive, and would impose costs we cannot afford to absorb," Honda stated to parliament in its submission.
The company builds 8% of all vehicles in Britain.
The automaker also claims customs would hinder its ability to bring greener vehicles to Britain and the EU. Vauxhall says it would need to stockpile goods in warehouses before Brexit to help accommodate delays at the border. Ford states the impact of the company's two engine plants would result in a "negative impact on cash-flow."
Honda has increased its attempt to contact owners who have ignored their safety recall notices. The recall of some Takata (TKTDQ, Financial) airbags leaves drivers and others at risk. The company has taken drastic action to ensure customers have the airbags replaced. The company has sent out service technicians to owners' homes to inspect vehicles and airbags. Honda confirms the technicians are from its offices and are part of its quality control inspection.
Honda is on a search for some 100,000 airbag inflators that are deemed most dangerous and have yet to be replaced.
Driver fatalities are reduced by 29% when frontal airbags are installed and passenger fatalities are reduced by 30%. There are 37,000 killed in car accidents annually and 2,800 killed in California alone.
Honda has increased recall pit crews that go door-to-door seeking the dangerous airbags. The airbags have been recalled since 2008-09. Cars located with the faulty airbags will be repaired immediately when found. According to The National Highway Traffic Safety Administration, 70% of vehicles recalled get fixed.
Fiat Chrysler (FCAU, Financial) is also working to get Takata airbags out of vehicles. The company is working with repair shops to alert drivers of the severity of the issue. The issue takes 30 minutes to fix, according to Honda.
Honda also announced earlier in the week it may have to recall airbags again. The company is inspecting and replacing airbag inflators that may have been improperly installed under the initial recall.
Honda has failed to disclose how many airbags will need to be reinstalled, but the company said the number is "very small."
Honda's stock is down over 2.45% in the trailing five-day period on the news. The stock remains a strong performer in 2017, with expectations of 14.42% EPS growth over the next three years. The company's year-over-year increase in U.S. sales is also a bright spot, with sales rising over 0.9%.
Disclosure: The writer has no interests in any of the equities mentioned.
