GM to Wall Street: Recalls May Last into Summer
General Motors is telling Wall Street that a recent spate of recalls may last until mid-summer as the company continues to review unresolved safety issues.
The news comes a day after The Associated Press learned that GM CEO Mary Barra told members of Congress that the company cannot make ignition switches fast enough to keep up with demand in its recall of 2.6 million small cars.
The ignition switch problem has been linked to at least 13 deaths in crashes involving Chevrolet Cobalts and Saturn Ions. Congress and the Justice Department are investigating why GM knew about the switch problem for at least a decade but only started recalling the cars this February.
GM has undertaken a safety review that has resulted in 29 U.S. recalls so far this year covering a total of 13.8 million vehicles, more than five times the number of cars and trucks the company sold in the U.S. last year.
In a note to investors, Barclays analyst Brian Johnson wrote that he met with GM management on Wednesday, and was told by product development chief Mark Reuss that GM continues to review safety data for potential recalls and that recalls could persist into mid-summer. Johnson also wrote that it’s possible that cars already subject to one recall could be part of future recalls.
Senior management will be more involved in safety, with Reuss leading a team of five people who will decide on future recalls, Johnson wrote. The company is trying to issue recalls as soon as it learns about an issue rather than waiting for more data, according to Johnson.
“This will increase the frequency of recalls, but will reduce the total number of vehicles recalled,” the analyst wrote.
Meanwhile, Barra is preparing for a return trip to Capitol Hill as an investigation by an outside attorney into the ignition switch recall delays nears a close. She told lawmakers Wednesday that GM’s plan to compensate victims of small-car crashes could be released at the same time as the results of the investigation, according to a congressional aide who asked not to be identified because the meetings were private.
Barra, who visited lawmakers on Capitol Hill for private meetings Wednesday, told them that GM’s supply of replacement ignition switches like won’t catch up to demand until July. She said when that happens, GM plans to start a campaign to persuade people to take cars to dealers for repairs, according to a congressional aide who asked not to be identified because the meetings were private.
Among the lawmakers Barra met with were Sen. Claire McCaskill, D-Missouri, and Dianna DeGette, D-Colorado. Both were highly critical of the chief executive last month when she testified at Senate and House hearings about GM’s handling of the ignition switch problem. With victims’ families looking on, Barra said she was unable to answer many questions until an internal investigation into the matter was complete.
Frustrated, lawmakers finally elicited a promise from Barra to return to testify when the company’s probe was finished.
In late May or early June, she’ll have answers. The automaker hired former U.S. Attorney Anton Valukas to investigate why it took so long for GM to recall the small cars. GM has promised an “unvarnished” report, and Barra told Congress last month she will take decisive action on its findings.
The company also hired compensation expert Kenneth Feinberg to negotiate settlements with crash victims. Lawyers say they have at least 400 possible cases against GM, and the settlements could cost the company billions.
Last week GM admitted to concealing the ignition switch problems from the National Highway Traffic Safety Administration and agreed to pay a $35 million fine, the maximum the agency can impose.
On Thursday, three senators introduced a bill that would lift the $35 million cap, saying that the current amount is too low to discourage automakers from hiding problems.