Wednesday, June 3, 2015

GM might shake off recall stigma, experts say

The 2013 Cadillac XTS is the brand´s new flagship and its replacement for the STS and DTS models. (Mike Appleton/Cadillac/MCT)
The 2013 Cadillac XTS is the brand's new flagship and its replacement for the STS and DTS models. (Mike Appleton/Cadillac/MCT)

General Motors Co. is mired in one of the biggest auto safety scandals in years. But if history is any guide, car shoppers will be more forgiving than regulators and safety advocates.

Ford Motor Co. suffered through problems decades ago with Pintos burning up and Explorer sport utilities rolling over when their tires failed. More recently, Toyota Motor Corp. recalled millions of cars after incidents of sudden acceleration.

In each case, the automakers spent billions of dollars to recall vehicles, fix problems and settle legal issues. But their sales bounced back.

GM is now contending with a pair of massive recalls totaling 1.6 million cars. The automaker has acknowledged to the National Highway Traffic Safety Administration that at least 12 deaths and 31 traffic accidents have been linked to its vehicles' faulty ignition switches. An independent consumer watchdog group says the number of front-seat deaths caused by the defect could be as high as 303.

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  • A segment of buyers already have a poor image of GM – the "Government Motors" critics who dislike the company because of its 2009 federal bailout, said Jessica Caldwell, an analyst with car shopping company Edmunds.com.

    "But they were never going to be Chevrolet customers anyway," Caldwell said.

    Interest in GM brands has not taken a dive since the ignition switch recall started last month, she said. The number of people coming to Edmunds.com to research buying vehicles has held steady.

    Likewise, car shopping website Kelley Blue Book has not seen any change in retail transaction data, used-car values or Web traffic concerning GM brands.

    GM's path through crisis may be easier than Toyota's in other ways too. Toyota's troubles included a fiery San Diego crash in 2009 that killed a family and led to the recall of millions of cars, federal fines, a criminal investigation and potentially billions of dollars in liability settlement expenses.

    At one point in 2010, Toyota briefly stopped sales of eight models – including top sellers such as the Camry and Corolla – saying the gas pedals could get stuck and cause runaway acceleration. The automaker also shut down production of the vehicles for a week while it examined how to fix the problem, which it attributed to wear on the pedal system.

    "The thing with Toyota is that it concerned what was current product," said Jack Nerad, an analyst with Kelley Blue Book. "As ugly as this is with GM, all of it is with product that is long out of the pipeline."

    Toyota's U.S. sales share dipped at the height of the recalls but rebounded. It sold 1.8 million vehicles in 2010 and 2.2 million last year. Big discounts, favorable interest rate deals and an offer of two years of free maintenance helped jump-start that growth, Caldwell said.

    The GM recalls were issued in February and affect 1.4 million cars in the U.S. The models are 2003-07 Saturn Ions, 2006-07 Chevrolet HHRs, 2006-07 Pontiac Solstices, 2006-07 Saturn Sky models, and 2005-07 Chevrolet Cobalt and Pontiac G5 models. The cars all share the same ignition component; none of them remain in production.

    The faulty switch makes it possible for a heavy key chain or driver's knee to knock the ignition key out of the "run" position while the car is on the road. This disables safety systems such as the power steering, antilock brakes and air bags.

    Internal documents submitted by GM to NHTSA show the automaker was aware of the issue as early as 2001, when it surfaced on a prototype Saturn Ion. The problem was first noticed in production models in 2004, the documents show.

    NHTSA and GM have come under heavy fire from lawmakers and safety advocates for not acting sooner. The Department of Justice and committees in the U.S. House and Senate have opened investigations in the matter. GM is likely to face at least a $35 million civil fine.

    Meanwhile, the Center for Auto Safety, an independent watchdog group, announced Thursday that it had commissioned a report by Friedman Research. The study used raw data from fatal accident reports in which the air bags didn't deploy in two of the six models affected by this GM recall.

    Based on the data, the Center for Auto Safety said 303 front-seat deaths had been caused by the non-deployment of air bags in the cars.

    GM responded by calling the analysis "pure speculation," saying it's too early to tell just how many of those deaths were tied to the faulty ignitions. Some of the deaths could have been caused by other factors, such as the passenger seat air bag sensor malfunctioning.

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