UPDATE 3-GM recalls 1.5 mln more vehicles; CEO says ‘terrible things happened’ – Reuters

Posted: Tuesday, March 18, 2014

* New actions are unrelated to ignition switch problems

* GM to take $300 mln charge in 1st qtr for all four recalls

* CEO vows changes in recall procedures

* Working with Delphi to double output of replacement
ignition switches

By Ben Klayman

DETROIT, March 17 (Reuters) – General Motors Co
announced new recalls of 1.5 million vehicles on Monday and in a
virtually unprecedented public admission by a GM chief
executive, Mary Barra acknowledged the company fell short in
catching faulty ignition switches linked to 12 deaths.

“Something went wrong with our process in this instance, and
terrible things happened,” she told employees in a video message
posted online. Barra said the company is changing how it handles
defect investigations and recalls.

In the last two months, GM has recalled more than 3.1
million vehicles in the United States and other markets. The
actions started with last month’s recall of more than 1.6
million vehicles for faulty ignition switches.
The latest recalls cover airbag wiring harnesses, brake parts
and other components across several models.

The Detroit automaker said on Monday it would take a $300
million charge in the first quarter, primarily to cover the
costs related to the ignition-switch recall and the three new

Barra previously apologized for GM’s failure to catch the
faulty ignition switches sooner. In Monday’s video, she said GM
is “conducting an intense review of our internal processes and
will have more developments to announce as we move forward.”

The decade-long process that led to last month’s
ignition-switch recall of such older GM models as the 2005-2007
Chevrolet Cobalt and 2003-2007 Saturn Ion has led to government
criminal and civil investigations, congressional hearings and
class-action lawsuits in the United States and Canada. All ask
why GM took so long to address a problem it has said first came
to its attention in 2001.

Barra said on Monday that the company was working with the
supplier of the ignition switches, Delphi Automotive,
to add a second production line for replacement parts and that
customers would receive a detailed notice by mail during the
second week of April.

The latest recalls cover more than 1.5 million newer
crossover utility vehicles, luxury sedans and full-size vans.
While there were reports of engine compartment fires in two
dealer-owned Cadillac XTS sedans, the company said it has
received no reports of accidents or injuries related to the
three new recalls.

GM said the latest recalls include 1.18 million mid-sized
crossovers to repair an issue that could lead to the
nondeployment of side airbags. It said it will repair the wiring
harness of seat-mounted side airbags.

Affected are some 2008-2009 and all 2010-2013 Buick Enclave
and GMC Acadia crossovers, some 2009 and all 2010-2013 Chevrolet
Traverses and some 2008-2009 and all 2010 Saturn Outlooks. Most
of the vehicles were sold in the United States, but some are in
Canada and Mexico.

The automaker also is recalling 303,000 Chevrolet Express
and GMC Savana full-size vans to replace plastic material in the
passenger instrument panel to meet federal head-impact crash
standards for unbelted passengers, a spokesman said.

Affected are vans from model years 2009 through 2014 that
are rated to carry up to 10,000 pounds including the vehicle’s
own weight, the spokesman said. Most were sold in the United
States, but also in Canada, Mexico and other markets.

In the XTS, a brake booster pump wiring issue can lead to
overheating, melting of plastic parts and a possible engine
compartment fire, the spokesman said. There were two reports of
fires in unsold cars on dealer lots in June and September last
year as well as two cases of melted components.

Affected are 63,900 of the 2013 and 2014 luxury sedans,
mostly in the United States, but also in Canada, Mexico and a
small number in the Middle East, the spokesman said.


GM said the new recalls resulted from Barra’s push for a
comprehensive internal safety review following the
ignition-switch recall.

“I asked our team to redouble our efforts on our pending
product reviews, bring them forward and resolve them quickly,”
Barra said in a statement on Monday.

On Friday, the automaker was hit with what appeared to be
the first U.S. class action related to the ignition-switch
recall, as customers claimed their vehicles lost value because
of the ignition switch problems. The proposed class action was
filed in a Texas federal court. Other
plaintiffs’ lawyers say they are preparing to file similar cases
in the coming days.

GM shares closed 1.6 percent higher at $34.63 on Monday on
the New York Stock Exchange. Last week, the shares fell 10

Analysts have called the media coverage of the
ignition-switch recall and resulting sell-off of GM stock

“We think much is being made in the media about recent
recall headlines, but in short, we believe GM is doing a good
job balancing its ongoing investigation while taking steps to
prevent further vehicle related incidents by proactively
announcing new vehicle recalls,” Stifel analyst James Albertine
said in a research note on Monday.

“There is clearly a target on GM’s back, in our view, given
its highly publicized government-sponsored bailout and its
industry-leading market share position.”

Barclays analyst Brian Johnson said the risk of market-share
loss increased because the latest recalls include newer models
on dealer lots.

RBC Capital Markets analyst Joseph Spak said the charge for
the recalls worked out to less than $100 per vehicle, but the
greater risk was the potential damage to GM’s reputation and
whether that would force the company to offer higher incentives
to customers to defend its U.S. market share.


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