General Motors Co. (NYSE: GM) has been taking it on the chin over its recalls. With congressional inquiries and investigations picking up, this would sound like it is really bad news. Of course it is bad news, but the reality is that the impact on the stock price so far may be far worse than the economic realities. It turns out the GM’s bankruptcy reorganization may shield GM from much of this damage directly.

How GM handles this with the public will likely determine the indirect costs, such as brand damage and customers turning their backs on GM.

We have looked for outside commentary on this matter, and it turns out that GM may only have a potential $150 million liability here.

What investors have to recall is that when GM notified the National Highway Traffic Safety Administration of a defect in roughly 619,000 vehicles, the model years involved were 2005 to 2007 vehicles. GM then widened out the numbers to almost 750,000 more vehicles later in February.

So where does this $150 million max liability come from? It is from Sterne Agee’s Michael Ward. The analyst maintained a Buy rating and also maintained a $50 price target. GM shares have slid from $37.50 last week to just under $35 on Wednesday. Ward said:

The potential cost of a recall, in our view, is $150 million, and the liability beyond the recall is minimal, but we believe the company has an opportunity to go above and beyond what is required and prove change has indeed occurred at the company.

The Sterne Agee report suggested that roughly 1.3 million cars affected are still on the road, and the cost per unit would run $100 to $125 for a repair cost liability. Ward further said:

In the bankruptcy process, the new GM did not assume liability for claims arising from incidents prior to July 2009. As a result, the liability from the affected vehicles for GM is limited.

Ward pointed out the same issue we referred to — the potential perception and reputation in the marketplace. He also admits that so-called headline risk will remain (in the stock) until the company takes action.

The Wall Street Journal earlier reported that GM is offering owners of the affected vehicles a $500 cash allowance through April 30 to be used for buyers who want to buy or lease a new 2013, 2014 or 2015 model car from GM, including Chevrolet, Buick, GMC or Cadillac.

GM shares were down another 0.7% at $34.95 in mid-day trading on Wednesday, against a 52-week range of $27.11 to $41.85. Also, keep in mind that GM’s market value is $55.5 billion, even after nearly a 10% drop in a few days.

And recall that GM, Ford and others have suffered from weak sales due to weather. Measuring the direct impact from the recalls may not be as simple as it might seem.

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