General Motors Co.
) announced that it is hiring a team to probe into an ignition
switch recall of 1.6 million older-model small cars associated
with 31 crashes with 13 front-seat fatalities. The investigation
team comprises attorney Anton Valukas, the chairman of Chicago
law firm Jenner & Block Tony Valukas and General Motors'
general counsel Michael Millikin. In addition, attorneys from the
King & Spalding firm will be joining the team.
General Motors will carry out the investigation to gain an
unbiased report on the reason behind the delayed recall. Given
his efficiency in the Lehman Brothers bankruptcy case, the
company believes that Valukas' presence will add value to the
After the report of the accidents, 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 of 778,562 Chevrolet Cobalt and 2005-2007
Pontiac G5 compact cars in North America on Feb 13, 2014. With
this, the company is recalling 1,367,146 vehicles in total.
The company will fix the faulty ignition switches, which has been
identified as the cause of the accidents. According to General
Motors, a heavy key ring or uneven roads can cause the ignition
switch to shift away from the run position, thus turning off the
engine and electrical power. In such a situation, the front air
bags will not inflate in case of a crash.
General Motors is focused on resolving the issue and also
apologized for the delay. The company will be informing customers
and will rectify the fault at no extra charge.
The chronology of events filed with the The National Highway
Traffic Safety Administration (NHTSA) clearly points out General
Motors' awareness of the problem since 2004, when its
engineer detected the hitch while test driving the
2005 Chevrolet Cobalt. The company initially attempted to avoid a
recall by issuing Technical Service Bulletins for the problem.
The bulletin advised inserting a key into the ignition switch of
the Chevrolet HHR and Cobalt, Pontiac Solstice and G5, and Saturn
Sky and Ion vehicles. Moreover, the automaker advised its
customers not to use heavy key chains.
NHTSA, the auto safety supervisory body of the U.S. government,
has announced an investigation into General Motors's delayed
recall. Lawfully, the automakers are supposed to alert the NHTSA
about any safety concern in vehicles within five business days of
recognizing the problem. The maximum fine for late reporting
currently stands at $35 million.
General Motors currently holds a Zacks Rank #5 (Strong Sell).
Better-ranked automobile stocks worth considering are T
ata Motors Limited
Tesla Motors, Inc.
). Tata and Daimler sport a Zacks Rank #1 (Strong Buy) while
Tesla is Zacks Rank #2 (Buy) stock.
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