It has so far recalled nearly 26 million vehicles in the U.S. alone, and almost 29 million worldwide – more than any other maker in a single year. But after announcing 54 separate service actions since just the beginning of the year, GM is signaling that its recall blitz finally might be over.
Even then, the maker’s recall headaches are far from over. GM last month announced details of a new victims’ compensation fund to cover the deaths and injuries linked to a faulty ignition switch, a plan that could top $1 billion, according to some analysts. The maker also faces an assortment of legal problems, including a class action lawsuit filed in Seattle that could seek as much as $10 billion in damages. There are separate investigations underway in both houses of Congress, as well as a probe by the Justice Department. And GM has already said it expects to spend about $2.4 billion to handle all those recall during just the first half of 2014.
But the worst, in terms of new recalls could be over, wrote JP Morgan auto analyst Ryan Brinkman, in a report last week, noting that, “GM concluded its enhanced product safety review that has led to a significantly elevated pace of vehicle recalls.”
Asked to comment on the JP Morgan report, a GM spokesman referred to a statement issued by the maker on June 30th quoting CEO Mary Barra. “We have worked aggressively to identify and address the major outstanding issues that could impact the safety of our customers,” Barra said. “If any other issues come to our attention, we will act appropriately and without hesitation.”
Following the February recall of 2.6 million vehicles due to a fatal ignition switch problem, GM appointed Jeff Boyer to serve as its new safety czar, reporting directly to CEO Barra and given authority to take far-reaching steps at a company critics claim has long been reluctant to order recalls. Indeed, documents released by the maker show it delayed by a decade a response to the switch problem.
Since February, GM has been ordering recalls at an unprecedented rate, averaging nine separate actions per month. The most recent move, on June 30, included six separate recalls – the majority of them for another ignition switch-related issue – covering 7.6 million vehicles sold in the U.S., 8.4 million worldwide.
GM is by no means the only maker that has stepped up its safety efforts under the glare of increased media attention and an apparent crackdown by federal regulators. Hours after GM’s latest move, Subaru recalled about 600,000 vehicles of its own due to rust issues. Toyota, Nissan, Honda and Mazda last month recalled millions of vehicles worldwide due to airbag problems.
All told, about 40 million cars, trucks and crossovers have been recalled in the U.S. so far this year, exceeding by roughly 20% the previous peak of 34.1 million set in 2004.
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Joe Hinrichs, Ford Motor Co.’s president of the Americas, recently told TheDetroitBureau.com that “unique circumstances going on in the industry” are to blame for the flurry of safety actions. Analysts point to several factors:
- Increased regulatory attention;
- Pressure from plaintiffs’ attorneys filing billions of dollars in claims; and
- A change in perception by manufacturers who realize the short-term PR damage from a recall is far less significant than being accused of stonewalling on a safety problem.
It also has helped that new, high-tech tracking systems allow manufacturers to more quickly identify potential safety-related issues.
Nonetheless, GM’s blitz has been unprecedented. The closest situation involved Toyota which recalled more than 10 million vehicles in late 2009 and 2010 due to problems with so-called unintended acceleration. As with GM, Toyota was accused of delaying its response to a known safety issue. It subsequently increased the pace of recalls for a variety of other issues, from faulty airbags to corrosion to vehicle fires.
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Whether the worst is now over for GM, at least from a numbers standpoint, remains to be seen. During her April testimony before Congress, CEO Barra had hinted that the Detroit maker was hoping to slow the recall pace in the weeks to follow. If anything, the tempo only increased.
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Credit – or blame – could be given to safety chief Boyer who told USA Today in May, “We’ve redoubled our efforts to go back and expedite matters currently under review.”
Beyond the short-term cost, industry analysts warn that GM’s ongoing safety problems could create long-term damage to its image. But, surprisingly, it has so far seen little impact in terms of sales, which rose 1% in June, ahead of most forecasts for the month, even as so-called residuals, or trade-in values, have held up surprisingly well, according to industry data, even for those vehicles covered by the big ignition switch recall.