General Motors to Focus on Safety - Analyst Blog


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General Motors Company ( GM ) has entered a damage control mode following the series of negative news regarding late recall of vehicles by the company. The automaker has created a new position of Vice President, Global Vehicle Safety to oversee all safety related issues in vehicles.

General Motors also announced three separate recalls, which in combination with the massive recall announced last month, will lead to a $300 million charge for the company in the first quarter of 2014. The company has recalled 303,000 Chevrolet Express and GMC Savana from model years 2009-2014 that have gross vehicle weight under 10,000 pounds, as they do not meet a head impact requirement for unrestrained passengers.

Additionally, General Motors has recalled 63,900 Cadillac XTS sedans from the 2013 and 2014 model years as a problem in the brake booster pump can result in melting of plastic components as well as an engine compartment fire. The company has reports of two engine compartment fires and two instances of melted components due to this problem.

The third recall involves 1.18 million Buick Enclave and GMC Acadia models from the 2008-2013 model years, Chevrolet Traverse from the 2009-2013 model years, and Saturn Outlook from the 2008-2010 model years. These vehicles have problem related to side impact restraints, including driver and passenger seat-mounted side air bags, front center air bag, and seat belt pretensioners.

These measures are a result of the heat General Motors is facing due to delay in recalling 1.6 million vehicles with ignition switch defect. On Feb 13, the automaker announced the recall of 778,562 Chevrolet Cobalt and Pontiac G5 compact cars from model years 2005-2007 in North America to fix faulty ignition switches. It was found that a heavy key ring or uneven roads could cause the ignition switch to shift from the run position, thereby turning off the engine and preventing deployment of front air bags in the event 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 for the same problem. However, the chronology of events filed with the National Highway Traffic Safety Administration (NHTSA) indicates that the faulty ignition switches were identified way back in 2001, during the pre-production test of the Saturn Ion.

General Motors is facing multiple investigations for the delay. Two congressional committees and the Justice Department will examine the reason behind the delayed recall along with an investigation by the NHTSA. Moreover, General Motors has hired a team to probe into the ignition switch recall.

General Motors currently holds a Zacks Rank #5 (Strong Sell). Some better-ranked automobile stocks worth considering are Tata Motors Limited ( TTM ), Daimler AG ( DDAIF ) and Tesla Motors, Inc. ( TSLA ). TTM and DDAIF sport a Zacks Rank #1 (Strong Buy) while TSLA has a Zacks Rank #2 (Buy).

DAIMLER AG (DDAIF): Get Free Report

GENERAL MOTORS (GM): Free Stock Analysis Report

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