Asbestos forces China car recall; blow to Chery, Great Wall

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Australia’s consumer protection agency said asbestos was found inside vehicles made by China’s Great Wall Motor Co. and Chery Automobile Co., prompting a safety investigation and the recall of about 23,000 units.

Customs and border officers found the banned fibre in imported spare parts, the Australian Competition and Consumer Commission said in an e-mailed statement today. Though consumers aren’t at risk during normal use, they should avoid “do-it- yourself” maintenance that may disturb engine and exhaust gaskets, according to the statement.

Asbestos’s resistance to fire, heat and chemicals helped it gain uses in construction and automaking before being banned in 55 nations because of health risks. The findings in Australia come at a time when the Chinese carmakers seek to bolster exports amid a slowing economy at home.

“It’s a blow to the automakers’ reputation,” said Johnny Wong, an analyst with Yuanta Securities Co. Still, “Chinese auto exporters have been banking on competitive pricing so the impact brought forward by this incident won’t be major,” he said.

Export Impact

Shang Yugui, a spokesman at Great Wall, the biggest maker of sport utility vehicles and pick-up trucks in China, said the company stopped using the parts in question soon after it became aware of the issue about a month ago. The parts were used in some vehicles sold in China and overseas markets, he said.

“We will actively proceed with the recall,” he said. “The export market has been really good for us this year. The incident won’t have much impact on our export and overseas expansion plans.”

Great Wall fell as much as 3.2 percent to HK$16.80 before trading at HK$16.84 as of 9:56 a.m. in Hong Kong.

Officials at Chery, the biggest maker of indigenous-brand cars in China, didn’t answer multiple phone calls seeking comment.

‘Absolute Disgrace’

The discovery was “an absolute disgrace”, Barry Robson, president of the Asbestos Diseases Foundation of Australia, said by phone from Sydney.

“There is a complete ban on asbestos products here in Australia and these people are flaunting it,” he said. “They’ve got to remove those cars off the road. Not every brake mechanic or car mechanic will know about this.”

The recall involves Great Wall’s SA 220, V240, X240, V200 and X200 models; as well as Chery’s J11 and J3, according to the ACCC’s website.

Ateco Automotive Pty, the Australian distributor, told Chery and Great Wall dealers to halt sales of the affected vehicles, according to the ACCC statement.

Ateco had received written assurances from the two manufacturers that no parts of the vehicles contained asbestos before imports began from Great Wall in 2009 and Chery in 2011, Daniel Cotterill, a public affairs official, said by phone from Sydney today.

Natural Fibres

Carmakers in China are expanding overseas to help offset slowing domestic sales as more plants open and local demand cools. Vehicle exports may rise about 50 percent this year, extending record shipments in 2011, according to the China Chamber of Commerce for the Import & Electronic Products.

Asbestos is the name given to six natural fibres about 1,200 times smaller than a strand of human hair that can be woven like fabric. The strands have been used for the last 140 years in construction. Evidence of the harmful effects of asbestos began appearing a century ago and national bans were first enacted in the 1970s.

Harm occurs when the asbestos fibres are inhaled and can lead to the development of lung cancers, including a malignancy of the lining of the lungs and abdomen known as mesothelioma, which often causes stabbing chest pains and can be fatal within 18 months.

James Hardie

Earlier this year, the High Court of Australia ruled James Hardie Industries SE (JHX), a seller of building products, misled investors about funding asbestos-related claims. The company, which the Medical Research and Compensation Foundation to pay claims of people who were injured by asbestos products, said in 2009 that the fund was running out of money and that it might be unable to meet its claims within two years.

Fifty Five countries including Japan and all members of the European Union have banned asbestos in factories, buildings and car parts. The U.S. Environmental Protection Agency selectively bans the material in products such as spray-on paint and pipe insulation.

All forms of asbestos are carcinogenic, according to the World Health Organisation. The Geneva-based UN agency estimates that one person dies every 5 minutes from an asbestos-related disease somewhere in the world, causing 107,000 deaths annually.David Fickling
Bloomberg Businessweek

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