Maybe General Motors (GM) is finally recovering from the record winter weather that hobbled car sales throughout the season. After all, GM has now sold a total of 903,713 vehicles in the U.S. in the first four months of the year, rebounding from one of the longest and deepest winters in recent memory.
General Motors might have taken a well-deserved victory lap, except for one issue: an eye-popping helping of GM recalls.
The numbers are simply astounding, so let’s lay them out.
- All told, GM has issued 29 recalls so far this year.
- General Motors has had to recall more than 8.4 million cars and light trucks this year — that’s more than nine times the number of vehicles it sold through the end of April.
- That number doesn’t even count the 5,354,307 vehicles GM recalled this month.
- The 13.8 million year-to-date GM recalls are already well past the company’s full-year record of 10.75 million, which it set back in 2004.
- GM will pay $35 million to the government because of how slowly it reacted to an ignition defect — and that’s the max penalty the National Highway Traffic Safety Administration can dole out. (Though some politicians are trying to change that.)
GM also must make sweeping changes to its internal review of safety-related issues and faces additional civil penalties because it failed to respond quickly enough to NHTSA’s request for documents. Federal law requires all auto manufacturers to notify NHTSA within five business days of determining that a safety-related defect exists or that a vehicle is not in compliance with federal motor vehicle safety standards and to promptly conduct a recall. GM admits in the Consent Order that it did not do so.
Voluntary safety recalls have been commonplace for decades, but very few pose a clear and present danger. With GM recalls, however, the size, scope and severity have grabbed the attention of regulators, lawmakers and consumer advocates. Now, the onus is now on GM to put these problems behind it once and for all.
Easier said than done.
Take the example of Toyota (TM), which recalled 7.1 million vehicles in 2010 in 19 separate campaigns. TM came under fire from federal regulators for delaying those recalls, and paid $66 million in government fines for not initiating three of the recalls quickly enough. In March of this year, the federal government finally reached a $1.2 billion settlement of a four-year criminal probe into the recall debacle.
That brings us to a more challenging issue: How much damage the GM recalls are doing to the automaker’s reputation and brand.
It’s too early to tell whether consumers perceive that GM vehicles are less safe than competing options.
But negative PR surrounding the GM recall — particularly questions about what GM knew about the fatal faults and when it knew it — is not good news for the company and its shareholders.
As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.