GM’s Turn: Company Recalls 1.3 Million Cars

Car recalls have become an epidemic with the sickest patient being Toyota (TM), which has recalled 8.5 million cars this year. GM, one of the car companies with a chance to benefit from the woes of the Japanese automaker, may have lost that opportunity. It announced a recall of 1.3 million compact cars in North America because of steering trouble. The defect may be to blame for 14 accidents.

Among the vehicles GM has recalled are 2005 to 2010 Chevrolet Cobalts and 2007-2010 Pontiac G5s sold in the United States,  2005-2006 Pontiac Pursuits sold in Canada, and 2005-2006 Pontiac G4s sold in Mexico.

Describing the nature of the problems GM Vice President of Quality Jamie Hresko said in the statement, “After our in-depth investigation, we found that this is a condition that takes time to develop. It tends to occur in older models out of warranty.”

The news shows how fragile the reputation of car brands can be, particularly during a period when the public hears about recall after recall from company after company day after day. It has been widely assumed that Toyota’s problems would cause potential customers to consider vehicles from rivals  including Ford (F), GM, Honda (HMC), and Nissan. Ford recently announced a voluntary action for its customers to get software upgrades for brakes in its Fusion and Mercury hybrids. That, by another name, is a recall of sorts.

February car sales are expected to be very low–perhaps only 800,000 vehicles sold domestically. At that rate, only a little over ten million cars would be sold in the US this year. The figure is little better than in 2009, one of the worst years for the industry in over three decades.

American car buyers are increasingly being left with the choice of keeping their current vehicles for another year while they see how industry-wide quality issues play out. Consumers at least know  that the cars they own now  usually run well. These vehicles can stay on the road, often with minimal maintenance.

There may be a “car buyers” strike in the US this year as potential customers decide that automobile quality has dropped, at least for the time being. A strike would bring annual car sales down much below industry expectations and would probably mean another year of losses at the firms that sell large numbers of vehicles domestically.

Too bad so few car companies can consistently manufacture vehicles without defects.

Douglas A. McIntyre