Maruti recalls A-Star on fuel leak

MUMBAI Tue Feb 23, 2010 10:44pm IST

Chairman of Maruti Suzuki India R. C. Bhargava (C) poses with Maruti's new A-Star hatchback model during its launch in New Delhi November 19, 2008. REUTERS/Vijay Mathur/Files

Chairman of Maruti Suzuki India R. C. Bhargava (C) poses with Maruti's new A-Star hatchback model during its launch in New Delhi November 19, 2008.

Credit: Reuters/Vijay Mathur/Files

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MUMBAI (Reuters) - India's top carmaker Maruti Suzuki India, 54 percent owned by Japan's Suzuki Motor, said on Tuesday it is recalling 100,000 of its A-Star hatchbacks to fix a possible fuel leak.

Maruti's move comes as Japanese rival Toyota Motor Corp is embroiled in a recall of 8.5 million vehicles globally for problems including sticky accelerators and a braking glitch on its hybrid models.

The recall of Maruti's popular model, which is exported to Europe, began in November and is about half complete. It will cost less than 100 million rupees ($2.2 million), the company said.

Maruti said it had not received any customer complaints but its shares closed down 3.2 percent at 1,336.85 rupees in a Mumbai market that rose 0.3 percent.

"I think there has been an impact to sentiment considering what is going on globally," said Vaishali Jajoo, an auto-sector analyst at Mumbai-based Angel Broking.

The recall includes cars sold in Europe though a tie-up with Japan's Nissan Motor Corp under Nissan's Pixo name, a Maruti company source said, declining to be identified.

A spokesman for Nissan in India could not immediately be reached for comment.

The A-Star's export markets include Germany, Britain and France. It sells for about 400,000 rupees in India and 6,500 to 7,500 euros in Europe.

A spokesman for the carmaker said that the appropriate regulatory authorities in Europe were informed last year about the recall, but the recall was not disclosed in India.

An internal analysis had shown that when fuel was filled beyond a certain point, there was a possibility of leakage, the spokesman said.

Deepesh Rathore, analyst with IHS GlobalInsight, said he does not expect substantial damage to be done to Maruti's image.

"Since no actual accidents have happened, people are likely to see it as a proactive step by the company," he said.

"In India, there is no law of highway safety or any regulatory authority of that nature which requires them to make such disclosures," Rathore said.

LITTLE COST

Maruti's Chief Financial Officer Ajay Seth said that adequate provisioning had been made for the recall in the December quarter earnings, announced on Jan. 23.

The final cost for replacing the faulty gasket, which leads to the potential leakage problem, would be shared with the supplier, Maruti said in a statement.

"We are reading too much into this. Recalls happen all the time and in our case it was a proactive step to prevent any incidents happening," he said.

The recalled vehicles were part of a batch made upto Aug. 22 last year, the spokesman said.

Between January and December last year, the company exported about 100,000 A-Stars, a model first launched in India in late 2008. It sells 3,500 to 4,000 A-stars a month in India.

Maruti is on track to hit annual sales of 1 million cars in the current financial year that ends in March.

(US$1=46.22 rupees = 0.7376 euros)

(Additional reporting by Devidutta Tripathy & Pratish Narayanan; editing by Malini Menon and David Cowell)

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