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GM Faces Fire Again, Another 2.7 Million to Be Recalled
Posted by: Arrow Analysis (IP Logged)
Date: May 16, 2014 10:26AM
Within three months General Motors (GM) has been once again compelled to recall 3 million cars and trucks globally to settle five different safety problems which have led to hundreds of complaints and several injuries. The Auto Industry Giant is already facing heat for producing 2.6 million defective cars having faulty ignition switches.
On Thursday, the auto maker recalled another 2.7 million cars which puts the number of recalls at 11 million this year, perhaps an industry first. This latest recall may even create a "record," some commented snidely. GM had already spent a whopping $1.3 billion in repairs in its first quarter and is expected to spend another $200 million in the next. All these, we must say, do not make up a very enticing picture from the investors’ point of view.
The Cars Associated With Recalls
The company has released a list of faults associated with the vehicles recalled. The problems include faulty brake lights, headlamps, windshield wiper and power brakes. Malfunctioning tail lights seem to be the predominant issue worldwide and vehicles like Chevrolet Malibu, Pontiac G6, Saturn Aura, among others will have this problem remedied.
A malfunctioning tail light may not seem like much, but unfortunately a faulty rare lamp may also be responsible in damaging the electronic circuit of the cars. As a result, the cars may lose their cruise control, traction control and even the braking assist feature, resulting in fatalities. Chevrolet Tahoe SUVs and more than 500 full-size pickup trucks are also being called back because of potential accident hazards due to defective tie-rod.
Apart from these, cars such as Corvettes, Cadillac CTS Sedans, Chevy Malibu Sedans, full-size trucks and SUVs have also been named in the call back. Corvettes come with faulty headlamps and CTS models suffer a windshield wiper problem. The low-beam headlights of Corvette Models are also susceptible to failure and hence necessitate immediate call-back.
What the Company Is Doing
This action is the ninth time in 16 months that the industry giant has recalled vehicles which they knew were faulty but did nothing to correct that. As before, GM sent only an obligatory bulletin to dealers, an analysis by The New York Times reported. The company has repeatedly sent these letters, the report claimed, calling them technical service bulletins, to their dealers and, at times, to vehicle owners as stopgap safety measures instead of doing what was expected of such an illustrious corporation, that is, ordering timely recalls.
As expected, the costs of repairs go up with time. Moreover, with each fault reported, the automaker loses consumer trust.
In response to the allegations, General Motors is issuing a directive for internal change. Two top-level engineers have been asked to leave the company, while two more have been suspended with pay. Jeffery Boyer has been appointed new safety chief.
But even with these changes, the question remains, is this enough? Safety is the primary concern of any family. When a consumer purchases a vehicle, they do so with the assurance that they are purchasing the best that money can buy, both in terms of quality and safety.
GM’s complete disregard for timely actions has voided that trust. In the auto industry, trust is one of the major factors that led to growth. We can buy a phone even if we don’t trust the maker. The worst that can happen is the phone will stop working. Money down the drain sure, but nothing more.
If the automaker loses the trust of its buyers, there is no way the company can recover from this fatal blow.
Stocks Discussed: GM,