Shares in auto giant Stellantis (STLA) raced higher today despite having to issue another recall of thousands of vehicles over safety concerns.
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Restraint Risk
The U.S. National Highway Traffic Safety Administration (NHTSA) said Stellantis, whose brands include Chrysler, Dodge and Fiat, is recalling 121,398 vehicles in the United States due to a safety issue with head restraints.
The NHTSA announced that the affected vehicles have head restraints that may not lock properly, which could increase the risk of injury to seat occupants during a crash.
The recall affects various Stellantis models, though specific vehicle types were not detailed in the NHTSA announcement.
This is the latest in a series of recalls that have battered Stellantis this year. As one can see below, it is the key risk for the business and investors.
Earlier in July, the NHTSA said it had opened a recall query into about 299,000 vehicles from Stellantis after receiving complaints about faulty shifter cable bushings.
A bushing, usually made of rubber, connects the shifter cable to the transmission system, allowing the vehicle to change gears. If the bushing is damaged or missing, the vehicle could move in an unexpected and unhelpful direction.
In June, Stellantis said it was recalling 250,651 vehicles in the U.S., due to an improperly sealed side curtain air bag.
Other recalls this year include 235,640 Ram ProMaster vans with faulty rearview camera systems, 33,777 Ram 1500 trucks with headlight failure issues and 10,396 Ram 1500 pickup trucks with tire pressure monitor errors.
Tariff Hope
At a difficult time for the auto industry given faltering consumer confidence, this spate of recalls is an unwelcome hit to brand reputation.
However, its share price hike of over 6% in pre-market trading today was largely down to the deal struck between the U.S. and Japan. This cut the threatened tariffs on car and parts imports from Japan to 15% from 25% and raised hopes that general global tariff uncertainty could soon be coming to an end.
This has weighed heavily on Stellantis stock this year.
Is STLA a Good Stock to Buy Now?
On TipRanks, STLA has a Hold consensus based on 4 Buy, 10 Hold and 2 Sell ratings. Its highest price target is $14.08. STLA stock’s consensus price target is $10.96 implying, an 18.23% upside.
