General Motors (NYSE: GM) has been recalling lots of different models because of faulty ignition switches. It began with a recall of cars from 2007 and before, but now it seems that an ever increasing amount of cars continue to be added to the recall list. The faulty ignition switches made their way into dealerships, and the automaker now has a serious problem in tracking them all down. As of the end of March, 2014, the General Motors safety recall has skyrocketed to 4.8 million automobiles.
It has surfaced that General Motors knew about the faulty ignition switches, which have been responsible for at least 13 deaths since 2004. GM has taken no action to correct the problem until now. The National Highway Traffic Safety Administration and the Justice Department have begun investigation of GM over the issue. New CEO of two months, Mary Barra, is scheduled to testify before a congressional committee concerning the safety recalls on the first of April.
GM has been having lots of issues with its automobiles lately. Along with the ignition switch recall, General Motors has been forced to recall nearly 500,000 pickup trucks and SUVs due to a transmission issue that can cause a deadly fire. Deliveries of the new Chevy Cruze have been halted, but the reason for the halt has not been disclosed. Dealers have commented that these halts are routine, and usually related to a safety issue. Safety issues, however, are far too numerous for the Detroit-based automaker.
At the end of 2013, GM was trading near the 52-week high of $41.85 per share. Shares have generally gone down during 2014, with a weak rally during February and the beginning of March. Alongside news of the compounding recalls, shares came down approximately 3 points during March, and the future could be uncertain.
GM is currently trading at $34.73. The now skyrocketing safety recall of 4.8 million automobiles could bring shares down even further for General Motors. It’s interesting to note that, exactly one year ago, GM was trading near the 52-week low of $27.11.
General Motors wants desperately to increase their market share to 33%, and they plan to take a careful look at customer satisfaction. They are primarily concerned with customers and dealerships. With both, GM is concerned about brand loyalty, and GM has noted a particular concern for dealerships that have set up non-GM franchises in the wake of recent problems.
CEO Barra is scrambling to convince the public that GM vehicles are still safe, and thus bring more customers to GM. She has created a new position called Vice President of Global Vehicle Safety, and has appointed Jeff Boyer to the post. Boyer has been working with GM since he was 18 years old, and has 4 decades worth of experience with the company.
The spotlight on General Motors could prove overbearing for Vice President Boyer and the rest of the company. The investigation process is already turning up new safety issues with GM vehicles. The Chevy Cobalt has recently been flagged with dangerous fuel leaks and power steering safety issues.
Overall, things look bad for GM right now. Investors ought to be concerned about the share price, which very well could continue spiraling downward. There are way too many safety issues coming out at the moment, and the company seems desperate to assure the public that their automobiles are still safe. Even dealerships are beginning to branch out into non-GM franchises in the wake of all this. The skyrocketing safety recall from General Motors could well increase beyond 4.8 million at this point. It is clear that GM will have to work hard in order to repair both their vehicles and their public image.
By Luke Sargent