UPDATE: Today (Monday), General Motors Company (NYSE: GM) announced three more 2014 recalls. So far this year, GM stock has been feeling the sting of recall fallout, to the tune of a nearly 16% drop to $34.39 per share.
The most worrisome of today's recalls, both in terms of consumer safety and number of vehicles affected, is an air bag issue that will have to be fixed for 1.2 million of GM's crossover SUV models. If a customer ignores a warning light that reads "Service Air Bag," it can result in non-deployment on a side impact collision.
Meanwhile, 64,000 2013-2014 Cadillac XTS full-size sedans are being recalled to repair overheating brakes responsible for two fires, and 303,000 Chevrolet Express and GMC Savana full-size vans are being recalled to improve the instrument panel and assure safety of unbelted passengers who hit it during an accident.
A spokesman for GM said the company is not aware of any injuries caused by these problems.
But on Thursday, public interest group "The Center for Auto Safety" released a study claiming that there were 303 deaths in recalled GM cars in which airbags did not deploy. The study examined federal data to reach its conclusion.
What's more, the group's report states that GM intentionally misrepresented raw information about the crashes.
Following Thursday's release, GM fired back, saying the deaths are not tied to faulty air bags, but instead connected to problems with the ignition.
"Without rigorous analysis, it is pure speculation to attempt to draw any meaningful conclusions," the company said in a statement. "In contrast, research is underway at GM and the investigation of the ignition switch recall and the impact of the defective switch is ongoing."
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GM's 2014 recall issues began unfolding in February, when General Motors recalled 1.6 million vehicles. Then, it was only one in a slew of early 2014 recalls from the likes of Toyota Motor Corp. (NYSE: TM), Ford Motor Corp. (NYSE: F), and Tesla Motors Inc. (Nasdaq: TSLA).
But it turns out GM's recall is markedly different from the rest.
That's because GM knew of the defect that's caused fatal and nonfatal crashes at least as early as 2004, it admitted late Wednesday. And today's huge air bag recall adds to the speculation that GM has a habit of keeping dangerous defects from the public.
For its inaction, brand faith - and GM stock - will suffer.
"This is going to be a legacy issue for years to come," Money Morning Capital Wave Strategist Shah Gilani said to Neil Cavuto on FOX Business in February.
The GM (NYSE: GM) Recall Is Huge
Here is a summary of the February GM recall details:
- An ignition issue, caused by either a heavy key ring or a "jarring event," can shut off the ignition and prevent air bags from properly deploying.
- In a Feb. 13 news release, GM said it knew of six deaths in five crashes in which the front air bags did not deploy, as well as 17 other crashes "involving some type of frontal impact and nonfatal injuries where the air bags did not deploy."
- The ignition recall affects the 2005-2007 Chevrolet Cobalts and Pontiac G5, the 2003-2007 Saturn Ions, the 2006-2007 Chevrolet HHRs, the 2006-2007 Pontiac Solstice, and the 2007 Saturn Sky.
"This latest GM recall involves 22 crashes and six fatalities tied directly to a design issue," Kelley Blue Book senior analyst Karl Brauer said to USA Today.
Gilani pointed out that several more instances may surface.
But what really sets this recall apart is the news of how long GM knew about the defect without acting.
Before its admission this week, we'd pieced together the history of GM's knowledge of the ignition defect...
Back in 2005, GM sent a technical service bulletin warning to dealers about a stalling problem related to heavy key rings in the 2005-2006 Cobalt.
And a deposition from a 2010 civil lawsuit shows that in 2004, GM knew the Cobalt had an ignition switch that could involuntarily shut off the engine while driving. GM settled that case for an undisclosed amount with the plaintiff - the estate of the 29-year-old pediatric nurse who died in a fatal crash the day after picking up her 2005 Cobalt from the dealer, where she'd taken it for ignition switch problems, according to documents obtained by USA Today.
It goes back even further.
"GM has known about an ignition problem since the 1960s," Gilani said.
He's referring to a fix-it column called "Gus Wilson's 'The Model Garage,'" run from 1920 through the 1960s in Popular Science magazine. In one issue, a customer's stalling engine was resolved by removing several keys from her key ring.
"[This recall] is certainly a reason for investors to hold back," Gilani said. "If I own GM stock, I'd want to look at some floor to get out if it continues to drop - it's going to get hit on this. I wouldn't touch the stock, and it's going to be a legacy issue for years to come."
Watch the following video for Gilani's full breakdown of the GM recall, plus two automakers he recommends for investors - and the two he would avoid:
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Related Articles:
- National Highway Traffic Safety Administration: General Motors Recall Report
- USA Today: