Recall: Ignition Switch Debacle Is Quickly Dropping Chevrolet Cobalt, Saturn Ion Resale Value

  @angeloyoung_a.young@ibtimes.com on July 24 2014 4:44 PM
  • 001 Cobalt
    A 2007 Chevrolet Cobalt. The 2005 to 2007 Cobalt has been most associated with GM's fatal ignition switch flaw. A used Cobalt (or a used Pontiac G5, which is very similar to the Cobalt) has lost nearly 14 percent of its resale value since last year. That's twice as much as an average used GM vehicle. Creative Commons
  • 002 Saturn Ion
    A 2007 Saturn Ion. Along with the Chevrolet Cobalt, the Saturn Ion has been most associated with the fatal GM ignition switch flaw. It too has lost nearly 14 percent of its resale value since last year. Creative Commons
  • 003 HHR
    A 2007 Chevrolet HHR was one of the six models named in January's recall of 2.7 million GM cars containing a fatal ignition switch design flaw. The car has lost 11.5 percent of its resale value from last year, more than the 7 percent average drop for all GM cars in the same period of time. Creative Commons
  • 004 Sky
    A 2006 Saturn Sky. Like the five other models named in January's recall, the Sky is losing value faster than the average used GM vehicle. But it's retaining more value than the Cobalt and Ion. Creative Commons
  • 005 Solstice
    A 2006 Pontiac Solstice. The sporty convertible is retaining its value better than the other five models named in the January recall of 2.7 million GM cars containing a fatal ignition switch flaw. But it's still losing value faster than the average used GM car. Creative Commons
1 of 5

If you’re the unlucky owner of one of those shoddy and potentially dangerous cars that “the old GM” unleashed on the American public, your car is devaluing at a rapid pace. While it might be no surprise to anyone that cars spotlighted as rolling accidents waiting to happen lose resale value, a new analysis of millions of used car listings puts some numbers to the effect.

“Our data shows the recalls of the Chevrolet Cobalt, Saturn Ion and other GM models are playing a role in motivating sellers to lower the price they expect to make on their sales," says Phong Ly, CEO of  iSeeCars.com, a Boston-based automotive listing site.

Ly examined the used car price listing for the six General Motors Co. (NYSE:GM) models named in a January recall of 2.7 million older sedans whose ignitions switches have harbored an alarming design flaw for years that has been linked to at least 16 deaths and 61 accidents. What he found was that the recalled vehicles have dropped in price twice as much as GM’s other cars since the company began in January one of the largest raft of recalls in automotive history.

GM Recalled Model Resale A new analysis of millions of used-car listings shows the resale value of GM cars linked fatal ignition-switch flaw has declined between about 10 percent and 14 percent since last year. The average price decline for all GM cars in the sample was 7 percent.  IBTimes

The Chevrolet Cobalt, for example, saw its price drop 13.7 percent from March to June compared to the same period last year. While some devaluation would be expected, it’s much higher than the 7 percent average drop for all used GM cars in the study sample over the same period.

Furthermore, Ly found that the devaluation has accelerated in recent months as GM keeps announcing more design flaws largely affecting Chevrolet sedans. The average drop in used-car prices in the six models was 12.5 percent in March; last month that decrease was 15.5 percent compared to June 2013.

GM recalled car resale value The average price drop for the six models linked to the fatal ignition switch design fell by over 15 percent last month compared to June 2013, suggesting that sellers have dropped prices significantly in recent months.  IBTimes

The analysis also found that the Chevrolet HHR station wagon, Saturn Sky and Pontiac Solstice dropped less than the Cobalt, Pontiac G5 (which is basically the Pontiac version of the Cobalt) and the Saturn Ion. They’ve devalued more than the average GM used car in the sample, but not as much as the two cars most prominently linked to the ignition switch flaw, the Cobalt and the Ion. GM’s latest monthly sales report suggests new Chevrolet brand sedans could also be feeling the impact of the recalls.

GM CEO Mary Barra, who took the helm in January just as the GM ignition switch controversy erupted, has since ordered the recall nearly 30 million GM cars to fix myriad flaws. Ignition-switch related recalls now stand at between 8 million and 9 million vehicles, though GM claims most of them only require a modification to the ignition key.

Though it has established a victims compensation fund, GM says it will fight lawsuits from vehicle owners who claim damages related to the loss of value of recalled vehicles. Last month GM was hit with a federal lawsuit filed by law firm Hagens Berman Sobol Shapiro in Riverside, California, claiming all of ther automaker's cars, trucks and SUVs have lost between $500 and $2,600 in value due to the damaged reputation of the company.

"GM's egregious and widely publicized conduct and the never-ending and piecemeal nature of GM's recalls has so tarnished the affected vehicles that no reasonable consumer would have paid the price they did when the GM brand meant safety and success," says the complaint, which could demand more than $10 billion in damages in a class-action lawsuit covering 15 million GM car and truck owners.

On Thursday GM announced it was charging $400 million in its second quarter ending June 30 to compensate victims of ignition-switch-related accidents. The costs of the recall nearly wiped out GM’s profit in the second quarter. GM closed down 4.46 percent to $35.74 Thursday after Wall Street reacted negatively to the company’s financial results after missing revenue expectations.

Join the Discussion