General Motors Co.
) has been facing difficult times due to delay in recalling
vehicles with faulty ignition switches. Now it is facing media
scrutiny since it excluded the 2004 Saturn Ion from its recall on
Feb 13 despite being aware of four fatalities in the car. Saturn
Ions, along with many other GM vehicles, were found to have
faulty ignition switches which may lead to abrupt engine
shutdown, leading to near-fatal crashes.
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General Motors recalled Saturn Ion two weeks later than the Feb
13 recall, after an enquiry detected four crashes associated with
the Ions. The automaker was aware of the incidents since they
The chronology of events filed with the National Highway Traffic
Safety Administration (NHTSA) also indicates that the faulty
ignition switches were identified way back in 2001 during the
pre-production test of the Ions. However, the company assumed
that a change in design resolved the problem.
On Feb 13, General Motors announced the recall of 778,562
Chevrolet Cobalt and Pontiac G5 compact cars of model years 2005
to 2007 in North America to fix the faulty ignition switches. A
heavy key ring or undulating roads can cause the ignition switch
to shift away from the run position, thus turning off the engine.
In such a situation, the front air bags will not be deployed in
case of a crash.
Later, on Feb 25, General Motors announced a recall of 842,000
2003-2007 Saturn Ions, 2006-2007 Chevrolet HHRs, and 2006-2007
Pontiac Solstice and Saturn Sky models in addition to the recall
on Feb 13, 2014. With this, the company recalled 1,367,146
vehicles in total.
Two congressional committees and the Justice Department will
examine the reason behind the delayed recall. The NHTSA also
announced an investigation into General Motors delayed recall of
1.6 million older-model small cars. Moreover, General Motors has
hired a team to probe into the ignition switch recall.
General Motors notified that dealers will replace the ignition
switch to prevent the involuntary key movement. The customers
have been advised to use only the ignition key without anything
else on the key ring. Moreover, customers should use their safety
General Motors also announced to offer free loaner cars and $500
for a new vehicle to the owners of compact cars recalled for the
ignition switch defect. The owners will be able to use the loaner
cars until the availability of parts to replace the faulty
switches, which is expected to be by April 7. The $500 cash
allowance offer is valid till April 30.
General Motors currently holds a Zacks Rank #5 (Strong Sell).
Better-ranked automobile stocks worth considering are
Tata Motors Ltd.
Tesla Motors, Inc.
). Tata and Daimler sport a Zacks Rank #1 (Strong Buy) while
Tesla is Zacks Rank #2 (Buy) stock.