GM Sales Are Strong Despite $1.7 Billion Recall Scandal

 @ThisIsPRop.ross@ibtimes.com
on June 05 2014 7:46 PM
  • Chevrolet_GM
    The Chevrolet logo is pictured on the front of a Chevrolet Camaro for sale at a car dealership in Los Angeles on April 1, 2014. Reuters/Mario Anzuoni
  • GM
    A man walks past a row of General Motors vehicles at a Chevrolet dealership in Detroit, Michigan April 1, 2014. Reuters
1 of 2

Despite a damaging investigation that linked a defect in some of General Motors’ cars to 13 deaths, GM (NYSE: GM) auto sales have remained steady.

Last month, the company reported its strongest monthly sales since 2008, according to numbers released Tuesday. U.S. sales in May were up nearly 13 percent from April, and analysts predict they’ll continue to rise.  

Several factors have allowed the GM brand to stay insulated from the controversy surrounding its recall of some 2.6 million small cars with defective ignition switches, according to analysts.

For one, the cars in question, including the car at the heart of the recall, the Chevrolet Cobalt, are out of production. Analysts say consumers simply do not associate those defective models with GM’s more popular vehicles.

“They might as well be in different solar systems,” Sean McAlinden, executive vice president of research and chief economist at the Center for Automotive Research, a nonprofit research group based in Ann Arbor, Michigan, told International Business Times.

McAlinden said that recalls are so frequent these days in the auto industry -- GM alone has issued dozens of recalls totaling nearly 16 million vehicles this year -- that consumers have become somewhat inured to them.  

“We’ve had some recalls on other vehicles, but that’s pretty standard for a safety issue or cosmetic issue,” John Bruno Jr., general sales manager at a Potamkin GM dealership in Manhattan, told IBTimes. “[The faulty ignition cars] came from such a different GM, it’s not even the same company it was. That was pre-bankruptcy General Motors. Now, I’ll put our product against any competitor.”

Bruno said that for the most part, this year’s recall doesn’t even come up with customers.

The results of a widespread internal investigation into the long-delayed recall of GM’s defective small cars were released Thursday. The report found that GM knew about the faulty ignitions a decade ago, but the matter didn’t reach upper management until late 2013. The recall was issued in February this year.

The total cost to GM of the company's 2014 recalls is about $1.7 billion, according to the report.  

Mary T. Barra, GM's chief executive, said 15 employees had been dismissed in connection with the defect that went unreported for so long.

“Repeatedly, individuals failed to disclose critical pieces of information that could have fundamentally changed the lives of those impacted by a faulty ignition switch,” she said. “If this information had been disclosed, I believe in my heart the company would have dealt with this matter appropriately.”

The company has established a compensation fund for victims and families who suffered serious injuries or fatalities before  July 9, 2009, when the Detroit automaker emerged from bankruptcy.

Share this article