More Bad News for GM in China: 1.5 Million Cars Recalled

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In China, General Motors Co. (NYSE: GM) has faced growing competition from local carmakers and the likes of Tata Motors Ltd. (NYSE: TTM), as well as the desperate measures being taken by legislators to reduce the sources of air pollution in major cities. Then this week came news that GM likely will get knocked from its perch as the sales leader in China by Volkswagen. Now to top it off, GM will recall nearly 1.5 million vehicles there due to potential safety issues.

In one of the biggest recalls in the world’s biggest auto market, GM’s joint venture with SAIC Motor — Shanghai General Motors — will fix Buick and Chevrolet models produced locally due to issues with a bracket that secures the fuel oil pump.

The recall could hit GM particularly hard, both in terms of reputation and in earnings. GM said it was looking to introduce four new Chevrolet models in China next year, as well as to expand its low-cost Baojun brand. But Chinese buyers already may be looking elsewhere, given the recent rise of VW and of Tata Motors, which sells Jaguar and Range Rover brand cars. Sales of Tata vehicles have risen sharply in the past year, and the company is set to begin producing cars in China soon.

However, VW’s Chinese unit last month recalled about 640,000 vehicles for checks that they were using the appropriate oil to avoid gearbox-related electronic flaws. It also took more than 200,000 Tiguan compact sport-utility vehicles off the road due to a risk of a partial light malfunction.

While both VW and GM, its main rival in the People’s Republic, have sold more than three million vehicles there this year, the German automaker holds on to a narrow lead. They are trailed in the country by sales from Ford Motor Co. (NYSE: F) and Toyota Motor Corp. (NYSE: TM).

Ford also faces a recall affecting close to 81,000 of its Kuga cars, produced with a Chinese partner, over a steering part.

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