General Motors (GM, Financial) announced a recall for more than 83,000 vehicles citing that there could be issues with the power steering which could fail to function suddenly. Problems with steering could make turning the car stiff while the car is being driven. The Detroit automaker is conscious of a crash, but no injuries or deaths due to the malfunction of the electronic power steering (EPS) system of the car have been reported, said company spokesperson Alan Adler.
The action is coming nearly a year after the company encountered massive recalls related to the faulty ignition switch. The latest recall is an extension of a year ago recall that covered 1.3 million vehicles in the U.S. concerning the EPS issue. Will General Motors be able to check its recall rate in 2015, or is it just the beginning of another year loaded with recalls? Here’s the lowdown.
A bit in details
General Motors reported that about 69,633 of the recalled vehicles belong to the US market, while the rest have been sold in Canada, Mexico and other export markets. The carmaker said in the National Highway Traffic Safety Administration’s website that the recall models include the 2006-7 Pontiac G6, the 2006-2007 Chevrolet Malibu and Malibu Maxx.
Last year, in April, an inquiry was raised by Transport Canada, following which General Motors decided on the recall. According to the Canadian regulators some of the car owners had complained about the power steering failure. However these cars were not included in the original recall that happened last year in the U.S. and Canada. General Motors continued its investigation on these car and finally concluded last month that there were quite a few reasons for which the steering could stop functioning properly. This problem extended to more than expected vehicles.
Last year the company handled the problem on the quiet by sending bulletins to dealers which warned of such issue and also provided the fix. However, according to The New York Times the fix would be offered only when a car owner complained of any such difficulty.
General Motors said that if the power steering is lost, a message will pop up on the Drivers Information Center to give alert. The car would revert to manual steering mode and the driver would be able to exercise control, it might be difficult though.
Will 2015 be another challenging year with recalls?
2014 saw massive GM recalls in North America that cost the company massively. The company’s earnings were severely impacted. The company registered a profit margin of 6.5% in North America in the last fiscal year. Margins would have been 240 percentage points better, had there not been such huge recalls. The company’s recalled 36 million vehicles across the globe in 2014 and incurred $2.9 billion on recalls and loaner cars.
In February 2014 General Motors recalled as many as 2.6 million Chevrolet Cobalts and other cars owing to the ignition switch problem. Faulty ignition switch resulted in the death of 42 people and injuries to 58 people. The automaker formed a separate program to settle the claims of victims related to faulty ignition switches accident and has made a payment of $93 million. Even in the final month of the year the American auto giant booked recalls of more than 221,000 vehicles owing to a brake problem.
It’s time for General Motors to check its recall volume. The recalls that the company experienced in the last year were unbelievably huge and absorbed the company’s profit, eating into the earnings per share. While recalls are part of an automakers routine, General Motors would surely not like it to happen in such a huge mass. So far this year the company hasn’t reported a big recall, so investors can keep their fingers crossed.
