Is General Motors trying to make lemonade out of lemons? In the case of the company’s recent string of lemon recalls, there seems to be a strategy to increase showroom traffic by issuing recalls for only those vehicles which do not require high costs to repair. GM CEO, Mary Barra, gave a hint at this strategy during last quarter’s earnings conference call.
Following is an excerpt from a transcript of GM’s April conference call Q & A session:
Adam Jonas – Morgan Stanley
Thanks. Good morning, everybody. First question is a two-part question. First, on the recall, 7 million units (recalled) obviously creates an enormous amount of showroom traffic and an opportunity to convert that traffic into new sales. So could you outline, perhaps, how successful have you been so far in getting folks coming in and holding the hand and obviously helping them with a real issue, but also perhaps helping to convert a sale in the process?…
Adam I think the first question as it relates to the 7 million unit recall and actually it’s 6 million actual vehicles but when we and when you look at the total amount of issues that were recalled we do see that as a huge opportunity it’s a little too early we’re in the early days it’s just a couple of weeks ago that we started having part kits coming so we can do repairs. Our dealers are well positioned to do that…
So, the seemingly “compassionate” Mary Barra sees recalls as a “huge opportunity.” The sleaziest part of this strategy, however, isn’t just the fact that GM may be recalling vehicles to help drive dealership showroom traffic. The ugly truth is that GM is focusing its recall efforts on vehicles that have a minimum cost of repair while continuing to deny that there are safety issues on those vehicles which have a more costly fix.
GM estimates that, of the 26 million or so vehicles it has recalled, the total recall cost runs about $2.5 billion. That is less than $100 per vehicle. The most costly recall would have been the one involving power steering failure; a recall that GM refused to do until after we pressured the company to recall the dangerous vehicles that had a known safety defect. If GM had gotten away with not recalling those vehicles, the cost per vehicle recalled would have been far lower than the $100 figure.
Moving on to one of GM’s latest recalls, we find a huge recall of about 8 million vehicles for what, apparently, was a similar issue to that in the infamous Chevy Cobalt ignition switch recall. While GM said it was aware of seven crashes, eight injuries and three fatalities related to the latest ignition switch issue, the company did not feel the need to go as far as they did in the Cobalt recall fix by replacing ignition switches. Instead, the company will give owners of the recalled vehicles a plastic insert to place inside their key slots (a failed fix first tried on the Chevy Cobalt) along with some free advice to not use other keys on the same key rings when driving GM vehicles with defective ignition switches. Coincidentally, the model year range for the majority of the recalled vehicles is 1997 to 2008; prime age for replacement!
The owners of GM vehicles with dangerously defective ignition switches should go to their local dealerships if they have further questions about heavy key chains and plastic key inserts. And, hey, while you’re there, don’t forget to stop in and talk to one of GM’s friendly sales folks!
GM gives the appearance of being very safety conscientious as it is quick to recall millions of vehicles on a now regular basis. The fact that the recalls do not cost the company much to resolve as showroom traffic increases is the more likely strategy for all of the recalls. Especially in light of GM’s continued refusal to recall its vehicles that are subject to brake line corrosion; a condition which will cost much more to resolve than giving motorists plastic key inserts.
The GM brake line rust issue is well known. The National Highway Traffic Safety Administration (NHTSA) has had an ongoing investigation on GM trucks and SUVs (primarily Chevy Silverado and GMC Sierra) since 2010. The investigation focuses on 1999-2003 models, but newer models have been reported to have the same problem. NHTSA, for whatever reason, has thus far done nothing noteworthy on all of the GM brake line rust complaints it has received, nor have they expanded the investigation to include later model vehicles.
GM claims that brake line rust is a maintenance issue and the responsibility of owners. Subaru recently weakened this argument when they recalled vehicles for the same issue. GM also claims that the vehicles in question (citing the NHTSA investigation of 1999-2003 models) are older and out of warranty and that all manufacturers have the same problem. Once again, GM is not being entirely truthful.
As I previously reported, GM has far more complaints for brake line rust than any other manufacturer. A NHTSA website search for brake line complaints, model years 1999-2008, confirms this with close to 2,000 complaints for Chevy and GMC vehicles compared to about 200 for Ford, Toyota and Honda combined! GM’s defense that only older vehicles are affected is also thin. A NHTSA website search for model year 2004 through 2008 Chevy and GMC vehicles found 420 brake line complaints compared to the next highest offender, which was Ford at only 45 complaints for the same model years.
I maintain that New GM is no different than Old GM when it comes to having a culture that puts profits ahead of safety. The same deceptive defenses and spin are being used to deny obvious safety concerns. GM should immediately recall vehicles that are prone to brake line corrosion and, if they do not, NHTSA should expand their GM brake line rust investigation to include later model years and force a recall.
Mark Modica is an NLPC Associate Fellow.