Recalls Affect GM Profits

The GM recalls have begun to affect the company’s bottom line according to Bill Vlasic of the NYTimes. Their profits fell by eighty-five percent in the first quarter of 2014 down to $125 million from $865 million. The recall centers around a faulty ignition switch found primarily in GM’s small cars. The recall has been widely publicized in the NYTimes, Automotive News and outer news outlets. Congress has even opened an inquiry to determine if there was wrongdoing.

One question that arises from this incident, is why should GM face all of the blame for a faulty ignition switch manufactured by another company entirely. Obviously, GM deserves some of the blame for not thoroughly testing their parts, but ultimately the manufacturer seems responsible for the faulty ignition switches. GM’s name, however, is far more recognizable than Delphi’s and GM has become a political animal since the bailout of 2009. Thus, most of the attention has been focused on “Government Motors” rather than its supplier. Time will tell if this fact has legal implications as well.

Source: http://www.nytimes.com/2014/04/25/business/general-motors-net-income-falls-85.html?ribbon-ad-idx=5&rref=automobiles&module=Ribbon&version=origin&region=Header&action=click&contentCollection=Automobiles&pgtype=article

7 comments to Recalls Affect GM Profits

  • Zachary Durkin

    While mistakes of this magnitude are not commonplace in the auto industry, we have to ask ourselves another question. Was this coming? How much of this is due to an outdated technology? The ignition switch has been utilized for several decades, and yet the auto industry has had the capacity to design more advanced ignition devices for several years. Why is “push-to-start” technology only recently making its debut? Couldn’t this whole fiasco been avoided if the American auto industry not been so complacent with its dominance in the market?

  • Jier Qiu

    Although the ignition switch is not produced by GM, the company is still responsible for examining the product and determine if it is qualified for the car’s specification. There are indications that GM approved the design of the ignition switch although it did not meet the standards in 2002. This is not the type of company people want to buy cars from. I would think the responsibility for the recall should fall on GM and NHTSA because both organizations were aware of this matter long before the recall and neither decided to do anything until this year.

    Source: http://www.usatoday.com/story/money/cars/2014/03/30/gm-ignition-switches-recall-congressional-report/7085919/

  • Michael Barry

    I agree with Jier. I think that in the end, by putting their name on their products, GM is offering an implied level of assurance that it is high quality. If they can’t assure that they have created a same, functional product, I believe that they deserve all forms of backlash that they receive, especially diminished levels of trust from consumers.

  • Kade Kenlon

    GM should take most of the responsibility for the faulty ignition switches because it was their automobiles that had the issue. GM gets the recognition when the parts of their car work smoothly or the seats are very comfortable; therefore, they are going to get criticized when the parts have problems. LIke you said, Delphi is not very well known but the average American. GM has the power to be very disappointed by Delphi’s products but they need to prevent those screwed up parts from entering their cars otherwise GM will suffer.

  • mayolj16

    It is true that initially the manufacturer of the part is to be blame, but the major issue is with GM since they recognized the faulty piece couple years ago and did not take any measures to solve the problem. The issue with the ignition switch might not be something that would pop up during the testings, and that is why it made it to the production line. Now that the problem has been recognized, could GM transfer the extra cost of having to replace all the parts from the recalled cars to the manufacturer? Even if they can get anything from the part manufacturer, how can they get a compensation for the bad image that has been created of GM after all these incidents?

  • Louis Ike

    Much like how company executives are responsible for the integrity and accuracy of financial statements even though they do not personally attend to making them, GM is responsible and liable for any malfunction with a part of its vehicle regardless of whether it was made in house or purchased from a third party. I hope to see GM making right on this issue because they put human lives a risk and that is not something to mess around with.

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