GM sales eyed for impact of ignition switch recall – Boston Globe

Posted: Wednesday, April 16, 2014

DETROIT — As General Motors executives show off their newest cars and trucks in New York this week, analysts are watching for signs that consumers are shying away from the ones sitting on dealer lots.

Many expect GM sales to take a hit from a mishandled recall of small cars. Any decline would hurt the automaker’s market share and credit rating. Concerned investors have sent GM stock to a 10-month low.

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Data collected from dealers by J.D. Power and Associates show GM’s sales in the United States fell 6.3 percent in the first five days of April, compared with a year earlier, while the overall market dropped just 0.3 percent.

April is expected to be a rebound month after a rough winter, and analysts expect sales to pick up in the month’s second half.

GM began recalling 2.6 million small cars worldwide in February to replace faulty ignition switches. The company says at least 13 deaths have been linked to the switch problem. Chief executive Mary Barra’s appearance before Congress this month drew even more attention to the issue.

Historically, big safety problems eventually affect sales, said Jesse Toprak, chief analyst at the car-buying site GM’s sales weren’t hurt in February or March, but data from April are starting to show weakness, Toprak said.

He said buyers trying to decide between GM and a rival ‘‘might just take GM from their consideration list, thinking that it’s not worth it.’’

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Barra, in a speech ahead of the New York show, said the company’s retail sales to individual buyers were up 7 percent last month, higher than the rest of the industry. In addition, GM’s average sale price set a record at $34,000, up $2,000 from February and more than $3,800 from last year, she said.

Jeff Schuster, senior vice president for LMC Automotive, a consulting firm, expects GM sales to show a gain this month, but only about half the 8 percent increase he forecasts for the industry overall. The recall might have an impact, but GM has also been struggling to match Ford and Chrysler in pickup sales, he said.

Schuster doesn’t think GM’s market share will plunge as much as Toyota’s did in 2010, when it recalled millions of cars because of unintended acceleration. The difference: GM no longer makes most of the cars it’s recalling. Toyota was recalling cars currently on sale.

In the second half of that year, Toyota sales fell more than 8 percent. For the full year, Toyota’s share of the US market dropped 1.5 percentage points, according to Autodata Corp.

So far this year, GM’s sales are down 2 percent, but its car sales have outperformed the market, rising 3.4 percent through March. And they could be helped later this year by models being introduced at the New York International Auto Show. GM will display a freshened Chevrolet Cruze compact for 2015, a high-performance Corvette convertible, and a new small SUV that gives Chevy an entry in one of the hottest-selling market segments.

A sales decline or increased use of discounts could have broader repercussions for GM. Standard and Poor’s last week said the recalls could prevent GM’s credit rating from returning to investment grade for the first time since 2005. The agency warned it is watching for ‘‘any significant deterioration’’ in sales. GM’s US market share in March was 16.7 percent, down 0.2 percentage points from a year before.

Ford Motor Co. is also off to a slow start in April, according to J.D. Power data, with sales down 10 percent for the first five days.

Several GM dealers said their sales haven’t been hurt by the recalls.

‘‘I haven’t noticed any impact on sales at all,’’ said Anthony Augelli, owner of a Buick-GMC dealership in Gurnee, Ill.

Joe Hinrichs, Ford’s Americas president, said sales were so strong at the end of March, it caused a slowdown at the start of April. The rest of the month should be stronger, he said.


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