In a recent announcement, GM stated that more than eight million vehicles will be recalled to replace faulty ignition switches that have been responsible for several crashes and 13 fatalities. With associated terms such as Total Recall and the Latin phrase, annus horriblis, it appears that things are getting worse for GM, as the company has recently announced an increase in the number of vehicles to be recalled.
The total number of GM recalls for the first half of 2014 is now estimated to be more than 29 million units, which is as many units as GM has sold in the last eight years. The 54 recalls that the company has issued cover all but three of the models that the company manufactures, and the latest recall follows announcements that the company has established compensation funds for the victims. Estimates are that GM will be obligated to pay out more than a billion dollars.
Despite the controversy, including an investigation by the Federal Trade Commission, and the record number of recalls that has now increased by more than eight million vehicles, the company’s sales appear to be unaffected. Sales for the month of June may have increased slightly, while incentives were decreased, and June was noted as one of the best months the company has had in the last six years. Interestingly, the values of many of GM’s used units are also unaffected.
By all impressions, it seems that newly-appointed GM CEO Mary Barra has adopted an appropriate approach to control the damage, which could be extensive. The recalls are seen as symptomatic of an internal culture, and bureaucracy that failed the customers. The response to the faulty ignition switches came after the damage was done. The apparent lack of accountability and transparency was not helped by the complex hierarchy and multiple brands, but it appears that there may be some changes in store.
The safety czar that Mary Barra has appointed has license to issue as many recalls as necessary, and a new GM may be arising as the company improves its line-up. Newer models, such as the venerable Corvette, and the Impala, along with the Silverado pickup have received top-rated reviews from many of the most well-respected auto review firms in the country. The product development cycle is expected to be decreased around the globe as the number of platforms is reduced. It is also hoped that decisions can be made much faster. There are also some plans to return the company to profitability in Europe within the next few years.
GM still faces a great amount of challenges, as sales have also slowed in Asia and Latin America, and there are skeptics who state that the number of multiple brands make it difficult to manage.
Despite the resiliency that has been demonstrated so far, even while GM increases the number of recalls by almost 8 million vehicles, the experts and observers are beginning to wonder how much more the company can take. In monetary terms, the costs of the recalls do not include lawsuits and settlements, and more recalls can be expected. According to recent reports in the Wall Street Journal, the company is expected to pay $1 million each to the families of those victims whose deaths were caused by the faulty switches.
By Dale Davidson