GM’s recall nightmare – CNNMoney
General Motors has already recalled more cars and trucks in the U.S. this year than it has sold here in the five years since it filed for bankruptcy.
Here’s the count: Since that filing in June 2009, GM has sold 12.1 million vehicles in the United States. Total U.S. recalls: 13.8 million.
Before the latest rash of recalls, the past five years had been good for the “New GM.” It recaptured lost market share. It made record profits. And it won praise for the quality of its cars from both critics and buyers.
Then on Feb. 14, GM announced a recall of about 800,000 cars due to an ignition switch problem that could cause the cars to shut off while being driven.
It has been engulfed by the recall crisis ever since.
The company’s problems have snowballed. GM (Fortune 500) ultimately recalled 2.6 million cars worldwide for the flawed ignition switch that’s been tied to at least 13 deaths. And GM admitted that its employees knew of the problem at least a decade before the recall. ,
Recalls hit a record
GM has issued more recalls this year than ever before. There have been 29 separate recalls covering 13.8 million U.S. cars and trucks, and 15.8 million vehicles worldwide.
The surge is the result of new standards at GM. The automaker says it’s issuing recalls more quickly when reports of problems emerge. And it’s also looking back at problems reported in the past that didn’t prompt a recall to see whether one would be warranted under these new standards.
GM named a new safety chief and also hired 35 additional investigators to follow up on reports of problems.
The company is going to great lengths to show how serious it’s taking matters. Last week GM called the owners of 477 trucks, including Silverados, Sierras and Tahoe SUVs to tell them to immediately stop driving the vehicles, which have a steering problem. GM sent flatbeds to pick up the trucks and have them repaired.
So far GM has agreed to pay the maximum fine of $35 million to the National Highway Traffic Safety Administration for the delay in the ignition recall. And it will be subject to closer oversight by the regulator.
The Justice Department is also considering whether to bring criminal charges against the automaker. A similar probe over Toyota’s 2009 and 2010 unintended acceleration recalls led to a $1.2 billion fine earlier this year.
GM CEO Mary Barra, who in January became the first woman to lead a major automaker, testified before Congress for two days in April. She faced harsh questions from lawmakers who argued the company is criminally liable.
The company isn’t legally responsible for injuries or deaths that occurred before its 2009 bankruptcy, and most of the deaths tied to the ignition recall did take place before the filing. But the company has hired compensation expert Kenneth Feinberg, who worked with victims of 9/11 and the BP oil spill, to determine how to pay victims of the delayed recall.
Despite the legal protections it gained in bankruptcy, the automaker is facing dozens of recall-related civil lawsuits.
Profits wiped out
The company estimates it will cost $1.7 billion to repair the cars recalled so far in 2014. That expense essentially erased the profit the company would have reported in the first quarter.
And that only covers the cost of actually making repairs, and not any civil or criminal fines it may have to pay to victims or the government.
GM shares are down 18% this year, lagging far behind rivals Toyota ( and )Ford Motor (Fortune 500). ,
Car buyers don’t care
The good news for GM is that car buyers have shown little concern about the recalls. New car sales have been strong in the three months since the ignition recall was announced, and the automaker is still No. 1 in U.S. market share. Even the price of used GM autos have stayed firm throughout the crisis.