Hyundai Motor <005380.KS> will recall 47,000 of its new Sonata sedans to fix faulty door latches, seeking to avoid the damaging criticism Japanese rival Toyota Motor Corp <7203.T> faces for its handling of a series of safety problems.
The South Korean automaker announced the voluntary recall after earlier saying it would suspend U.S. sales of its 2011 Sonata, a move analysts said was in contrast to Toyota's sluggish response to concerns about sudden unintended acceleration.
Recalls have become a highly sensitive issue since Toyota's recall, said Yim Eun-young, an analyst at Dongbu Securities.
Hyundai seems to have decided to deal with these issues as fast as they can.
Hyundai, which was the only major automaker to increase sales in the battered U.S. market last year, has targeted Toyota customers rattled by the acceleration problems linked to dozens of crashes and the recall of more than 8.5 million vehicles.
Shares in Hyundai Motor fell as much as 4.3 percent in early Wednesday trading and ended down 2.6 percent versus a 1 percent drop in the wider market <.KS11>. The stock had risen 13 percent since Toyota's recall woes spiraled in January.
Stephen Ahn, auto analyst at LIG Investment & Securities in Seoul, said the recall would undermine Hyundai's image at a time when customers were sensitive to quality following Toyota's mass recall.
But given that the flawed part is a not a key function such as the accelerator, powertrain or electronic controls, it will have little impact on Hyundai's sales, he said.
The Sonata and Elantra are the two top selling models for Hyundai, the world's No.4 carmaker with affiliate Kia Motors Corp <000270.KS>.
We have upgraded quality problems to a safety problem and decided to make a voluntary recall, the company said in an emailed statement in Korean.
NO RIPPLE EFFECT
The recall will affect about 1,300 of the 2011 Sonata sedans built through February 16 at Hyundai's plant in Alabama and sold to customers, plus 46,000 YF Sonata units produced through December 6 in South Korea. The new model started to be sold from September 2009 in South Korea and this month in the United States.
Hyundai notified dealers late on Monday of potential faults in the front-door latches of the new model that could affect 5,000 vehicles, and the stop-sale order was put into effect at U.S. dealers on Tuesday, a spokesman said.
It will notify South Korea's transport ministry and the U.S. National Highway Traffic Safety Administration this week of the decision to recall the cars in March.
The company said it received complaints from customers but no reports of accidents or injuries related to the model.
The South Korean automaker is targeting 4.5 percent market share in the United States this year, helped by popular new product launches and aggressive marketing.
Hyundai plans to launch the new Accent and a revamped Elantra this year, which competes against the Corolla and Honda's <7267.T> Civic.
With the new models, Hyundai aims to increase global sales in 2010 by 11 percent to 3.46 million vehicles.
Hyundai's U.S. sales rose 8.3 percent to 435,064 units in 2009, while industrywide U.S. sales fell 21 percent. Its U.S. market share increased to 4.2 percent from 3 percent in 2008.
(Additional reporting by Shin Jieun, Cheon Jong-woo, Seo Eun-kyung and Rhee So-eui; Editing by Ian Geoghegan and Lincoln Feast)