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June 18, 2014

GM recalls soar past 20 million. Why don't consumers care?

In case you thought there couldn't possibly be another General Motors recall so soon, you're just not thinking big enough. This week, GM said it was recalling 3.36 million more cars. The cause: an ignition switch defect that could result in keys carrying extra weight (read: a keychain) to slip out of position and shut the vehicle off abruptly during "some jarring event."

For those who are just tuning into the GM recall saga, some quick facts. GM has issued 44 recalls in North America this year alone. More than 20 million vehicles have been affected worldwide - a tremendous figure that surpasses total annual vehicle sales in the U.S. The recall pace has snowballed since the start of the year, with only two issued in January, but 14 so far this June for some 4.2 million vehicles. With half of the year left to go, GM is already looking at $2 billion in total recall-related charges.

While some recalls have been over more severe issues than others, the breadth and scope of GM's fiasco this year reveals a shocking safety crisis. At its current rate, GM is on track to shatter the entire auto industry's record for most vehicles affected in recalls in a single year, explains Michael Schultz, an industry analyst at the Center for Automotive Research. "It's unprecedented," says Schultz, who also expects that the company isn't done yet. "I anticipate there's going to be more until they have literally nothing else possible to issue a recall on," he says.

GM's latest recall is eerily reminiscent of a deadly ignition switch defect that led it to recall 2.6 million cars in February and March. In that case, GM said that if the keys in the cars were at all jostled, the vehicles' engines might turn off and shut down crucial systems like airbags and brakes; the defect has been linked to at least 13 deaths and 54 crashes. Earlier this month, an internal investigation denounced GM for a decade of negligence in addressing a problem it knew was serious. Fifteen employees have since been fired.

The scandalous handling of that severe defect has also drawn the attention of the Justice Department. Federal prosecutors have begun interviewing current and former GM employees as part of a criminal probe into the matter and at least 11 state attorneys general are investing GM as well.

Yet consumers don't seem to be paying much attention to the GM debacle. Despite the slew of recalls, GM's monthly sales in May rose to their highest level since August 2008. Sales of vehicles to individual buyers were up 10 percent and total sales increased 13 percent for the company's best May in seven years. "While there's a lot of media attention that's negative with all the recalls, it doesn't affect sales at all," Schultz explains. "Recalls have become so frequent as to just be background noise to consumers."

Maybe that's not such a bad thing when companies are issuing recalls for, say, a sticker inside the car bearing the wrong recommended tire pressure out of an abundance of caution. But the ignition-switch defect is far more serious - and the onus is on consumers to bring their cars in for repair. So until GM works out its kinks, this background noise is something drivers shouldn't tune out.

 

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