Even Used Car Prices Escape The Sting of GM’s Recalls – Forbes
Another week, another several million cars recalled. That’s been the agonizing trend for General Motors lately, a company that’s called back a reported 29 million vehicles so far this year for safety related issues, including potentially deadly problems with faulty ignition switches that date back as far as 2003. According to Consumerist.com, the company has called back more vehicles for repairs over the first six months in 2014 than it’s sold in total over the last seven model years.
Granted the car buying public may have become comfortably numbed by the barrage of car recalls over the last several years – even exotic brands like Lotus and Lamborghini have issued them for one reason or another – but GM seems to be rolling with the punches like an under-matched prizefighter. And that’s even with its CEO being called to testify before a Congressional subcommittee regarding a possible cover-up over the ignition switch debacle and the company subsequently announcing it would pay millions of dollars in “mea culpa” damages to victims and their families.
Still, despite the burgeoning brouhaha, GM posted its best June sales in the U.S. since 2007 with 267,461 vehicles delivered to retail and fleet customers, which represents selling-day-adjusted increases of nine and 10 percent, respectively.
Perhaps even more curious is that the resale values of vehicles involved in the initial ignition switch recall remain relatively unaffected based on auction sales data. These include the Chevrolet Cobalt and HHR, Pontiac G5 and Solstice, and Saturn Ion and Sky from the 2003 – 2011 model years. According to the market experts at NADA Used Car Guide, prices of 2005 – 2010 Chevy Cobalts fell by 9.4 percent from March to June on a sales weighted basis, with prices for Chevy’s HHR wagon dropping by just 6.9 percent. By comparison, overall compact car segment prices dropped by 10.6 during the same period.
“Chevy Cobalt prices have continued to move in a manner similar to competitive models within the compact car segment,” says Jonathan Banks, NADA’s executive automotive analyst. “So far, price movement of GM models recalled for faulty ignition switches has been more-or-less consistent with recalls of older models in the past.”
Executives at Toyota must be scratching their heads over why it wasn’t able to weather a similar storm as deftly in the wake of its own major recall campaigns involving possible unintended acceleration in 2009 and 2010. Though much of the loss can be attributed to the crippling economic recession, not only did Toyota’s new-vehicle sales subsequently drop by 20 percent, according to NADA used Toyota models lost around 40 percent of the price advantage they held over its competitors prior to the recalls.
“At this point we’ve observed nothing to indicate that similar movement is occurring on affected GM models,” says Banks.
Ronald Reagan may have been called the “Teflon President” for his ability to deflect any charges of corruption or scandal that was thrown his way, but General Motors is proving to be coated with an even slicker substance – surely petroleum based – with regard to its travails.
(Click here for insights on why Toyota felt the adverse effects of major recalls that GM seems to have escaped, courtesy of my colleague Karl Brauer.)