Honda Announces a Massive Minivan Recall. Will Rivals Rejoice?


The 2014 Odyssey. Photo: Honda Motor.

Over the weekend, Honda announced a recall of some 886,815 model year 2005-2010 Odyssey minivans manufactured from June 23, 2004, to Sept. 4, 2010. What exactly is wrong with them? Oh, not much. Just a potential fuel leak ... that could cause the minivans to burst into flames.

This was most definitely not the kind of news that Honda owners -- or Honda Motor Co. Ltd. (NYSE: HMC  ) investors -- wanted to hear.

Long considered the gold standard in family-friendly minivans, Honda's Odyssey has been a lone bright spot on Honda sales lots this year. In February, for example, Honda reported a 7% year-over-year decline in U.S. sales by its Honda and Acura divisions combined. This was its second straight monthly decline, and the second-worst performance among the eight remaining really big automakers -- Honda, Nissan, and Toyota (NYSE: TM  ) from Japan, Ford (NYSE: F  ) , General Motors (NYSE: GM  ) , and Chrysler from the U.S., Germany's Volkswagen, and South Korea's Hyundai/Kia.

Only Volkswagen did worse than Honda in February, posting a 13.8% decline in sales. Yet amid the gloom, Honda's Odyssey shone out with a 4.6% rise in sales year over year -- 8,945 units sold in the year's shortest month.

Odyssey sales could go nowhere for months
Repeating that feat may prove difficult for Honda in the face of the bad press from a near-900,000 vehicle recall.

Granted, the recall doesn't concern new Odysseys. But still, the fact that Honda admits it currently lacks an upgraded replacement part, free from the defect that necessitated this recall, won't do the company's reputation for quality any good. It won't be till next month that Honda even begins sending out notices of the defect, warning owners of the problem (and keeping the story alive in the process). Then, once made aware of the defect, Honda owners will have to wait until "summer" before they'll be allowed to bring their vehicles in to the dealer for a permanent fix.

This may give rivals such as Chrysler -- always a force to be reckoned with as inventor of the minivan -- a chance to convince would-be Odyssey shoppers to consider other options. Chrysler posted the second strongest sales gains among automakers last month -- up 11% year over year. The company boasted that Town & Country minivans had their "best February sales in two years and its seventh-consecutive month of year-over-year sales gains." Dodge Grand Caravan sales were up 1%, in line with growth at Town & Country.


While Honda's Odyssey is stalled, could Chrysler drive away with the minivan market? Photo: Chrysler.

Meanwhile, Ford Motor (which didn't have a particularly strong sales month in February) will be trying to get some traction with its new Transit Connect minivan -- and to capitalize on the success of its minivan-like Ford Flex SUV. Despite posting overall sales declines of 6.1% in February, Ford noted that the Flex posted a 19% increase in sales in the month, "one of the strongest sales gains of any Ford Motor Company product," according to automobilemag.com.


Ford's Flex. Photo: The Motley Fool.

The upshot for Honda
In the grand scheme of things, paying to repair recalled vehicles isn't often huge expense for automakers like Honda. (In fact, by bringing customers in the door, recalls may pay for themselves by giving car dealers a chance to upsell, advertise new vehicles for sale, and so on). The bigger risk for Honda is that after a string of hi-profile recalls in recent years, another recall of a popular product like the Odyssey could tarnish its reputation as "the gold standard" for minivans.

Expect Monday's stock price to reflect this fact.


Friday's close for Honda. Source: Yahoo! Finance.

You shouldn't have to pay "a lot for that muffler" -- or for the rest of the car, either
You don't know it yet, but you probably spent thousands more than you should have on your current vehicle. In fact, the auto industry can be such a dangerous place for consumers that our top auto experts are determined to even the playing field. That's why they created a brand-new free report on The Car Buying Secrets You Must Know. The advice inside could save you thousands of dollars on your next car, so be sure to read this report while it lasts. Your conscience, and your wallet, will thank you. Click here now for instant access.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2877320, ~/Articles/ArticleHandler.aspx, 12/21/2014 1:57:30 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement