General Motors Co. (GM) is facing a challenging situation due to the slew of recalls it has issued. The automaker announced that it is recalling 3.16 million vehicles of model years 2000 to 2014 from the U.S. The recall is being made to fix faulty ignition switches. In addition, the company announced 5 more recalls for different reasons involving 165,770 vehicles.
According to General Motors, a heavy key ring or uneven roads can cause the ignition switch to shift away from the run position, thus affecting the power steering and power braking. In such a situation, air bags will not be deployed in case of a crash.
Among the 3,160,725 vehicles recalled in the U.S. only one vehicle – Chevrolet Impala –is still in production. The other recalled vehicles include Buick Lacrosse of model years 2005–2009, Chevrolet Impala of model years 2006–2014, Cadillac Deville of model years 2000–2005, Cadillac DTS of model years 2007–2011, Buick Lucerne of model years 2006–2011, Buick Regal LS & GS of model year 2005, Chevy Monte Carlo of model years 2006–2008. The total recall including the U.S., Canada, Mexico and exports is 3,360,555 vehicles.
General Motors is aware of reports of 8 crashes and 6 injuries caused due to the ignition switch problem. The automaker will replace or repair the ignition switch in the next few weeks to prevent the involuntary key movement. Till the replacement is done, customers have been advised to use only the ignition key without anything else on the key ring.
In addition to the recall for faulty ignition switches, General Motors also announced 5 more recalls. In the first recall, General Motors recalled 68,887 Cadillac ATS of model years 2013–14 and 21,863 Cadillac CTS sedans of model year 2014. These vehicles feature automatic transmissions. The shift cable may loosen which will create difficulty for the driver to shift the vehicle out of gear. Notably, no casualties have been reported due to this issue.
General Motors also recalled 57,192 Chevrolet Silverado 2500/3500 HD and GMC Sierra 2500 and 3500 Heavy Duty GMC Sierra – all of model year 2015. The automaker recalled the vehicles to fix the power steering pump hoses which might detach leading to loss of power steering fluid and power brakes. The automaker said that dealers will inspect the hose clamps and see to it that it is secured.
In the third recall, General Motors recalled 16,932 Cadillac CTS sedans with all-wheel-drive of model year 2011. In these vehicles the gasket can leak, causing the rear propeller shaft to become loose and setting off a rollover sensor that inflates roof air bags. The automaker is aware of 15 unintended air bag deployments. However, the company does not have information about any casualty.
In the fourth recall, General Motors recalled 712 Chevrolet Corvettes of model year 2014 featuring Competition Sport Seats. In these vehicles, an unbelted child and door trim may block the deployment of the passenger seat side air bag. The automaker said that dealers will replace the current air bag with a redesigned version. The company also recommends the customers do not permit children to sit in the front seat till the vehicle is repaired.
Finally, General Motors recalled 184 Chevrolet Silverado and GMC Sierra full-size pickups of model year 2014–15, featuring vinyl floors and accessory all-weather floor mats, which may slip under the driver’s feet. Dealers will make full refund for the mats. No casualties have been reported due to this issue.
With this recall, General Motors issued a total of 44 recalls this year, which covers 20 million vehicles globally. This year, the automaker has recalled 17.7 million vehicles in the U.S. itself.
General Motors will have to incur a charge of $700 million in the second quarter of 2014 for repairing the recalled vehicles. This amount includes a previous charge of $400 million related to recalls announced during May 15 and May 20.
Recently, General Motors agreed to pay a fine of $35 million to the U.S. safety regulators for the late recall of vehicles with an ignition switch defect. Earlier, automakers like Ford Motor Co. (F) and Toyota Motor Corp. (TM) have also been penalized for delayed recalls.
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 worth considering.
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