Latest GM Recall Woes Hurt Q2 Results

Cameron Aubernon
by Cameron Aubernon

In today’s General Motors digest: The automaker takes it on the chin in its quarterly report; the analysts have their say; GM Korea could allow its workers to build the next Cruze if only they would put down the picket signs; 45 attorney generals are investigating the February 2014 recall; and CEO Mary Barra will be the keynote speaker for a connected-vehicle forum.

Autoblog reports GM made a net income of $200 million for Q2 2014, in comparison to $1.2 billion during Q2 2013. Speaking of $1.2 billion, that was how much the automaker paid in recall-related repairs this quarter, with a $900 million charge ready for future recall campaigns. Finally, $400 million has been set aside for the Feinberg compensation plan, though $200 million may be added down the road.

Meanwhile, Automotive News collected a number of analyst quotes regarding the poor Q2 2014 showing, including KBB.com’s Jack Nerad proclaiming that while the automaker may be handling recalls better these days, “it is paying for past sins in terms of the bottom line.” Michael Krebs of AutoTrader.com adds that GM “would have had an outstanding quarter” were it not for the ongoing recall parade, and both Brian Johnson of Barclays Capital (but not of AC/DC) and Morningstar’s David Whiston believing brighter days ahead in Europe and outstanding success in China.

Speaking of the Asia-Pacific, GM Korea management informed the employee’s union that if the latter calls off its impending strike over stalled wage negotiations, the next-gen Chevrolet Cruze would be built in its Gunsan facility. The factory — where the Orlando and current-gen Cruze are assembled — is one of four under GM Korea, and boasts a production capacity of 260,000 units per year.

Back at home, The Detroit News reports GM is under investigation by 45 attorney generals over the February 2014 ignition switch recall, as well as auto safety agency Transport Canada. On the federal level, CEO Mary Barra stated she hasn’t met with the prosecutors or the grand jury regarding the U.S. Attorney’s Office and the Securities and Exchange Commission investigations into wire and bankruptcy fraud related to the automaker’s 2009 bankruptcy proceedings.

Finally, Barra will be the keynote speaker at the 21st World Congress on Intelligent Transport Systems in Detroit September 7. The event, focused on connected vehicles, will attract 10,000 guests from 65 countries to share and discuss ideas, challenges and strategies regarding the burgeoning scene. Barra’s keynote will focus on the future of intelligent transportation.

Cameron Aubernon
Cameron Aubernon

Seattle-based writer, blogger, and photographer for many a publication. Born in Louisville. Raised in Kansas. Where I lay my head is home.

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  • Jeff S Jeff S on Jul 27, 2014

    @mickey--I agree. I have a 99 S-10 extended cab with a 2.2 I4 with a 5 speed manual that has been overall a good solid vehicle for over 15 years and a 2008 Isuzu I-370 I crew cab that has been good as well. Yes I have had issues with body hardware but then all the manufacturers have cheapened the body hardware along with putting more hard plastics in the interior. Nothing is build to last forever but when a serious defect exists the manufacturer needs to have a process to expediciously deal with it. The culture of GM needs to do a 180. Having owned a variety of different vehicles from GM, Chrysler, Ford, Honda, and Mitsubishi they all have their strengths and weaknesses. The ideal vehicle would take the best of all the various manufacturers. I realize that the perfect vehicle will never exist but a vehicle should be overall safe, economical, reliable, and last a reasonable amount of time (10 years).

  • Lou_BC Lou_BC on Jul 27, 2014

    Corporate culture is extremely difficult to change. You can't fire every single middle and upper management bozo sucking oxygen from the air and contributing nothing more than CO2 and heat in exchange for a pay cheque. I worked at the same facility directly and indirectly for 30 years and the same mistakes keep getting made, the CEO's came and went, managers got canned when new CEO's took oever but the place still has all of the same stupid issues occurring. I'm amazed I stayed there for that long but the front line work was interesting and stimulating and even a stint in management was good until the CEO burned herself out in two years trying to change the culture. I tried as well but all I got was a bad reputation with the rest of management. It never hurt me and was great because they all left me alone.

    • Thelaine Thelaine on Jul 28, 2014

      Agreed Lou, and I really wonder how often it has been done with a giant like GM. Ford had an advantage because the change just had to be radical when it went from family to outside control. The real leader was Bill Ford, who sucked it up and really handed over control - an incredibly bold move. He exposed many people he knew very well in order to save the company. He also picked the right person at the right time to do the job. I have a ton of respect for him. Amazing. I think companies like GM just keep on lurching along until they get nationalized or dismantled and gobbled up, like JeffS suggested. It has already happened to many American car companies - most recently, to my recollection, American motors and Chrysler.

  • EBFlex At the summer property putting boats in the water, leveling boat lifts, cleaning the lots for summer, etc. Typical cabin stuff in the most beautiful place on the planet
  • Lou_BC I've I spent the past few days in what we refer to as "the lower mainland". I see Tesla's everywhere and virtually every other brand of EV. I was in downtown Vancouver along side a Rivian R1T. A Rivian R1S came off as side street and was following it. I saw one other R1S. 18% of new vehicles in BC are EV'S. It tends to match what I saw out my windshield. I only saw 2 fullsized pickups. One was a cool '91 3/4 ton regular cab. I ran across 2 Tacoma's. Not many Jeeps. There were plenty of Porches, Mercedes, and BMW's. I saw 2 Aston Martin DBX707's. It's been fun car watching other than the stress of driving in big city urban traffic. I'd rather dodge 146,000 pound 9 axle logging trucks on one lane roads.
  • IBx1 Never got the appeal of these; it looks like there was a Soviet mandate to create a car with two doors and a roof that could be configured in different ways.
  • CAMeyer Considering how many voters will be voting for Trump because they remember that gas prices were low in 2020–never mind the pandemic—this seems like a wise move.
  • The Oracle Been out on the boat on Lake James (NC) and cooking up some hella good food here with friends at the lake place.
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