General Motors Co. (GM) is undergoing a challenging situation due to the series of recalls. The latest is a recall of 284,913 Chevrolet Aveo and Optra vehicles of model years 2004 to 2008 in the U.S. and other markets. Of these, 218,000 Chevrolet Aveo cars were recalled in the U.S. The automaker recalled the vehicles due to fire hazard.
According to the documents filed with the National Highway Traffic Safety Administration (NHTSA), General Motors reported that the daytime running light in the dashboard of these cars could overheat and lead to fire. The automaker reported that it is aware of some fire incidents. However, there is no report of any causality.
Earlier this week, General Motors announced four separate recalls in the U.S. amounting to 2.42 million vehicles. The automaker is trying to resolve outstanding safety issues quickly. Due to the series of recalls made recently, General Motors has hired 35 new product investigators to review its vehicles.
The automaker estimates that it will incur a charge of about $400 million in the second quarter for repairing all the vehicles recalled during this quarter. This amount is inclusive of the charge of $200 million for the recalls announced on May 15. The company had also recorded a $1.3 billion charge for recall-related repairs in the first quarter.
Recently, General Motors agreed to pay a fine of $35 million to the U.S. safety regulators due to the late recall of 2.6 million older-model small cars associated with 31 crashes and 13 front-seat fatalities due to faulty ignition switches. This is the maximum amount of fine which the government can impose. The penalty, however, constitutes only one day’s revenue of General Motors based on the company’s sales in the first quarter of 2014. Earlier, automakers like Ford Motor Co. (F) and Toyota Motor Corp. (TM) have also been fined for late recalls.
On May 21, CEO Mary Barra of General Motors met Democratic Senator Claire McCaskill of Missouri, a member of the Senate panel that is investigating the ignition switch recall. Barra provided the senator with an updated report on the automaker’s internal investigation.
General Motors currently holds a Zacks Rank #3 (Hold). Fox Factory Holding Corp (FOXF), carrying a Zacks Rank #1 (Strong Buy), is a better-ranked automobile stock.
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