It has now been over six months since General Motors finally recalled vehicles with a known deadly ignition switch defect. The defect was attributed with being the cause of accidents that resulted in at least 13 deaths. The Wall Street Journal now reports that only 34% of the recalled vehicles have been fixed.
GM has taken $3.4 billion in charges and losses on the past two earnings’ reports for all of their recalls, despite the fact that most of the recalled vehicles have yet to be repaired. The most questionable part of GM’s charges come from the first quarter’s earnings’ report.
In April of this year, GM took a $1.3 billion recall-related charge for the quarter ending March 31st. Repairs on recalled GM vehicles for the ignition switch defect began in April of this year. According to GM’s earnings’ release, the $1.3 billion charge was “for recall costs in the quarter.” That was followed by $1.2 billion attributed to recall costs in the second quarter and a $0.9 billion special items charge for future recall expenses.
I’m not quite sure what expenses GM had for recalls before they even started repairing vehicles, but I doubt they amounted to $1.3 billion. GM has had a history of not being totally transparent and having suspicious accounting methods.
I suspect that GM is hiding deeper problems with profitability by claiming that earnings disappointments are a result of recall costs. Be that as it may, the fact that GM has only repaired 34% of vehicles with a proven deadly defect is disturbing in itself.
One Saturn Ion owner in Virginia (who wished to remain anonymous) shared his frustrations with me as he has continually attempted to have his defective vehicle fixed. After several visits to his dealership, he was told that parts were finally ordered in early June. He is still waiting after being notified of the recall six months ago.
The owner I spoke with actually has two open recalls on his vehicle. The second recall was for a defective power steering unit, a recall prompted by us here at the National Legal and Policy Center. The power steering recall revolved around another defect that GM was well aware of. There were 3,489 reports to the National Highway Traffic Safety Administration (NHTSA) for loss of power steering in Saturn Ions before GM finally caved to pressure to recall the dangerous vehicles. Not surprisingly, the Ion owner from Virginia is still waiting for that recall to be resolved, as well.
GM CEO, Mary Barra, has been kind enough to send letters of apology (which states that parts might not be in until October) to those still waiting to have their vehicles fixed. While I’m sure that the apology is appreciated by owners of recalled vehicles who are still waiting to have there cars fixed after waiting six months, Ms. Barra should focus on getting dangerous vehicles off the roads now. GM’s failures regarding vehicle safety are unacceptable and apologies should not preclude criminal prosecution for those whose negligence costs the lives of victims driving vehicles with known deadly defects.
Mark Modica is an NLPC Associate Fellow.