GM Recall Costs Soar To $1.3 Billion; Suspends Two Engineers – Forbes
General Motors’ General Motors’ recall mess keeps going from bad to worse. On Thursday, the company said it now expects to take a charge of approximately $1.3 billion in the first quarter, up from $750 million previously, primarily for the cost of recall-related repairs and providing free loaners to customers.
The carmaker, which is under intense scrutiny for its delayed recall of some 2.2 million older cars with faulty ignition switches blamed for the deaths of 13 people, said it still expects to report “solid core operating performance” for the first quarter.
Also Thursday, GM said it had suspended two engineers while its investigation is ongoing and said it is adding ignition lock cylinders to its safety recall because drivers might be able to remove the key while the engine is running, leading to a possible rollaway, crash and occupant or pedestrian injuries.
GM said it is aware of several hundred complaints of keys coming out of ignitions. Searches of GM and government databases found one rollaway in a parking lot that resulted in a crash and one injury claim. The same searches turned up no fatalities. GM said it decided to replace the ignition lock cylinders and replace keys, if necessary.
The affected cars include Chevrolet Cobalt, Saturn Ion, Pontiac Solstice, Pontiac G5, Saturn Sky and Chevrolet HHR built between 2003 and s011. Full details are available here.
GM reminded owners of cars with manual transmissions to be sure the ignition is in the “Off” position and set to reverse gear with the parking brake set before removing the key. Owners of vehicles with automatic transmission should be sure the vehicle is in “Park” before removing the key.
The cars were recalled in recent weeks because the ignition switch could unexpectedly turn off when jarred, resulting in a loss of power, including air bags that don’t deploy in an accident. GM is replacing the switches — and now the cylinders too — and offering free loaner vehicles to customers who are worried about the safety of their vehicle. Until recall repairs are made, GM said customers should remove heavy items, including the key fob, from their key rings.
Meanwhile, the costs of the recall keep rising. GM originally said it would take a $300 million charge in the first quarter, then upped it to $750 million, and now, $1.3 billion.
GM had already warned in February that first quarter earnings would be lower than usual, citing $300 million for restructuring in Europe, Australia, and Brazil. GM also warned of “downside risks” in South America, particularly the volatile markets of Venezuela and Argentina. The company also said it faces higher expenses associated with the launch of new full-size SUVS and pickup trucks.
“The extent, and cost, of GM’s ignition switch recall has grown dramatically in the past few weeks,” said Karl Brauer, senior editor of Kelley Blue Book. “Much of this stems from GM’s desire to comprehensively address all aspects of the recall, though there’s also growing concern over potentially deceptive or criminal behavior that could result in government fines.”
In other words, the costs are still going up.
GM reports first quarter results on April 24.