Conflicting Tones in Responses to Latest GM Recall
The announcement from General Motors on Tuesday saying the automaker would recall 2.42 million additional vehicles was met with mixed reaction in the auto sector, with some thought toward these actions being positive steps for the automaker’s safety efforts, amid worries and strong words suggesting this news is actually a troubling sign.
In comments that Kelley Blue Book provided to the media, KBB president Jared Rowe called GM’s move an “opportunity” for the company to shore up the safety of its vehicles.
“GM is taking this opportunity to 'clean house' as it relates to safety recalls. With all the media coverage on the major recall, this now gives them an opportunity to perform all the recalls on other vehicles as the reasons and brands/models will probably be lost within the broader message/discussion,” Rowe said.
“This is the new norm going forward with recalls as manufacturers and regulators are expected to have higher standards and immediacy moving forward. We are seeing Mary Barra follow through on her commitment that GM’s customer and safety expectations are a priority,” he added.
Meanwhile, a statement from AAA chief executive officer Bob Darbelne released Tuesday had a sharply different tone. In fact, Darbelne put AAA’s support behind a proposal in the U.S. Department of Transportation’s Grow America Act that would allow regulators to increase the maximum penalty from $35 million (the amount NHTSA fined GM last week for failing to report in a timely manner its ignition switch defect) to $300 million
“AAA acknowledges the step taken by General Motors today to recall 2.42 million more U.S. vehicles with safety failures that could put motorists in harm's way,” Darbelne’s statement read. “However, (Tuesday’s) action also highlights the disturbing number of potential hazards to drivers behind the wheel that have come to light this year.
“It is distressing to note that GM has so far recalled close to 15 million vehicles in 2014, which is nearly equal to the total vehicles (15.6 million) all manufacturers sold in the U.S.in 2013 alone. AAA believes last week’s $35 million fine assessed to GM for delays in taking action with ignition interlocks that have been attributed to the deaths of 13 motorists does not send a strong enough message,” Darbelne said.
“GM and other automakers need to clearly understand that risking consumer lives is unacceptable and the costs for doing so must be appropriately severe. AAA supports the proposal to increase the maximum fine NHTSA can impose from $35 million to $300 million,” he added.
‘Tougher Stance’ by Feds; More Actions to Follow?
The fact that the DOT is proposing such measures in the first place — Auto Remarketing’s recap of the Grow America Act and other efforts can be found here — illustrates a more hardline approach by regulators to reign in what they have found to be a problem in the auto industry.
Eric Ibara, director of residual value consulting at KBB, said new measures by regulators will likely lead to other automakers taking similar steps as GM in order to adapt to the new landscape.
“Mary Barra’s actions state that from this moment, GM will no longer tolerate defects that would have previously gone unreported. It is reassuring to see that her actions match her testimony and press releases, but the fact is that it is a reflection of a tougher stance being adopted by federal regulators,” Ibara said Tuesday.
“These actions obviously have financial consequences and GM’s stock price has dropped about 15 percent since the start of the year,” he continued. “In the long run, GM will be a stronger company once it gets past this crisis. I would expect other manufacturers to follow with their recall announcements as they adjust to the new standards in the industry.”
KBB analyst Akshay Anand, meanwhile, expressed the dual nature of what GM’s recent action really means for the automaker.
“On one hand, it's a positive we've seen so many recalls under the new GM regime. It means their safety folks are being proactive and not taking chances, especially in light of all that has gone on,” Anand said. “At the same time, every additional recall has the potential to tarnish GM’s image.
“We've seen consumers still remember recalls from the past of other large brands, and the sheer volume GM has recalled recently is getting to unprecedented levels,” Anand continued. “It's also worth noting a new GM product received a stop-sell, as most of the issues have been with older GM vehicles.
“Perhaps this is a catalyst for consumers finally saying enough is enough. Time will tell.”
Editor's Note: Staff Writer Nick Zulovich contributed to this report.