By on April 7, 2014


In spite of General Motors losing $3 billion in shareholder value over four weeks since the recall crisis began, Bloomberg reports investors are holding onto their shares in the belief the automaker will recover from the debacle. Though questions about the delay persist, most shareholders are pleased with how CEO Mary Barra is guiding her company through the maelstrom.

Other factors in the massive stock decline include overseas challenges and weaknesses in product lines, including bringing European profits into the black, while Chevrolet’s Silverado fights Ram’s offerings in order to regain its traditional place in the monthly sales charts.

For those affected by the recall, CNN Money reports repairs of the out-of-spec ignition switch found in a handful of 2003 – 2011 vehicles will begin Monday, though the repairs will focus on the original recall of 2003 through 2007 models first, with fixes due later for 2008 – 2011 vehicles. GM advises consumers to make an appointment with their dealers before bringing in their affected vehicles. The repair is free of charge, and will take 30 minutes to accomplish, though customers may have to wait longer due to “scheduling requirements,” according to the automaker.

Speaking of the dealers, Bloomberg reports GM dealers as a whole have had to “act as therapists” for their customers who, like owner John McEleney of Clinton, Iowa, have been bombarded by recall news on a daily basis:

It’s a little bit unnerving because GM is on the front page — not of the business section, but the front page of the paper and the lead story on the news every day. People are concerned because they’re GM owners and they see all this publicity regarding GM.

Regarding the emergency injunction that would have forced GM to request affected consumers to park their cars until they were repaired, Detroit Free Press says U.S. District Judge Nelva Gonzales Ramos in Corpus Christi, Texas needs more time to thoroughly examine the brief filed on behalf of 15 families.

As for the National Highway Traffic Safety Administration, New York Times reports the agency and Congress both face questions over the former’s handling of the GM recall, from funding and punishments available to the NHTSA, to how the agency couldn’t find a clear link between the out-of-spec ignition and undeployed air bags in 2003 through 2006 Chevrolet Cobalts and Saturn Ions. Consumer advocate and former NHTSA chief Joan Claybrook offers this summation:

General Motors made the part, they designed the part, they sold the part that was defective and they knew about the problem fairly early on. And I believe that General Motors has the greatest culpability. But there is a really important story about NHTSA’s failure to handle this properly.

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10 Comments on “GM Shareholders Unflappable As Recall Repairs Begin This Week...”

  • avatar

    Of course they’re going to hold on to it, you don’t sell at that much loss unless you expect the company to fold.

    My grandfather had a lot of shares in Nissan? which he later sold to buy one of his kids a car, several years later (15 or so?) he read an article about how much that stock has exploded. The 10k or so he got from that stock would have been millions at that time.

  • avatar

    This issue does not pose any long term share holder value problem so this is to be expected. Once the breathless media circus winds down and the lawyers extract their pound of flesh under the guise of victim compensation, GM will continue with its current business plan (with some safety amendments) and continue to be profitable.

  • avatar

    GM was a flavor-of-the-month stock when the Treasury sold off the remaining holdings, but over the long term, it has been a buy-and-hold proposition. The dividend announcement was just gravy on top. GM is typically part of the boring part of your portfolio – post bailout even more so.

    A Fortune 100 that’s been around for 100+ years doesn’t really care about a quarter or 2 of bad press. Especially not when the expectation was that Government ownership was suppressing the price by ~%15-20.

  • avatar

    Financier J.P. Morgan was once asked where the market was headed. He told the interviewer, “The market will fluctuate.”

    That’s what the market price of securities does, often on little volume. Holders of those securities who live and die on the daily prices must like roller coaster rides. If you hold securities over the long term, you’re an investor. If you hold securities over the short term, you’re a speculator.

    • 0 avatar

      Okay, so if you’re looking at volume, that’s good.

      So now have a gander at Relative Strength. GM is only in the 24 percentile range. This is not a hold.

  • avatar

    One thing never seems to change: GM remains a flawed company but a compelling story line.

    This line of stories should be bannered as the Robert Farago Heritage Series.

  • avatar

    “Massive stock decline”? It went from around $40 to around $34, and a lot of that decline had to do with the lousy US sales numbers we saw across the board in early 2014 (F was down too). Any serious GM investor (disclosure: I own GM stock) is watching events closely, but I don’t think the recall will cause a huge selling wave unless something really bad breaks or Barra starts to look genuinely overwhelmed.

    GM’s survival is not presently a concern, Europe continues to improve, the products continue to improve, there’s plenty of money in the bank, progress continues to be made on a whole lot of other fronts. They are slowly but more-or-less surely taking the right steps to put GM’s profits in the same league as those at VW and Toyota, which should roughly double the stock price if they succeed. As long as that basic story continues to unfold, the stock still looks good over a 5-7 year horizon.

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