Did the Bailout Ruin GM?
The recalls are multiplying, and the bailout stigma remains.

(Bill Pugliano/Getty Images)


Jim Geraghty

You may have noticed that General Motors recalled a lot of vehicles lately.

You may not have noticed just how many separate recalls the company announced, 30 since January 1, or just how many vehicles are being recalled — 13.79 million vehicles in the U.S.

For perspective, consider that GM sold roughly 2.6 million vehicles in 2012.

Two weeks ago, GM informed the National Highway Traffic Safety Administration of five safety recalls covering about 2.7 million vehicles. The recalls covered:

2,440,524 previous-generation passenger cars for tail-lamp malfunctions

111,889 previous-generation Chevrolet Corvettes for loss of low-beam head lamps

140,067 Chevrolet Malibus from the model year 2014, for hydraulic-brake-booster malfunctions

19,225 Cadillac CTS 2013–14 models for windshield-wiper failures

477 full-size trucks from the model years 2014 and 2015, for a tie-rod defect that can lead to a crash

For the owners of those 477 trucks, this isn’t just a matter of driving your truck back to the dealer: “Customers are being contacted and told to have their vehicles taken by flatbed to their dealer, where the inner tie rods will be inspected for correct torque, and, if necessary, the steering gear will be replaced.”

All of the above mechanical flaws can be problematic on the road, but the recall notice for the 477 GM trucks is the biggest potential problem for the manufacturer. Trucks cost more (often more than $40,000 per vehicle) and have larger profit margins than sedans. Morgan Stanley estimated that truck sales account for two-thirds of GM’s earnings. In fact, one can easily argue that truck sales are keeping GM afloat:

Pulling off a smooth introduction for the 2014 Chevrolet Silverado and GMC Sierra big trucks is crucial, as they generate more than $12,000 per vehicle in profits. It is the most important vehicle introduction for the Detroit automaker since its bankruptcy and $50 billion U.S. taxpayer–funded bailout in 2009.

The May 15 notice of a tie-rod defect wasn’t the only recall for recently made GM trucks.

On March 31, GM recalled certain model-year 2014 Chevrolet Silverado Light Duty Regular Cab, Double Cab, and Crew Cab 1500 series and model-year 2015 Suburban and Tahoe vehicles; GMC model-year 2014 Sierra Regular Cab, Double Cab, and Crew Cab 1500 Series and model-year 2015 Yukon and Yukon XL vehicles equipped with a six-speed automatic transmission, for a transmission oil-cooler line that is not securely seated in the fitting. “If the line is not securely seated and transmission oil leaks from the fitting, the oil could contact a hot surface and cause a vehicle fire.”

On April 25, GM recalled certain model-year 2015 Chevrolet Silverado HD and GMC Sierra HD vehicles because of improperly torqued fuel-pipe connections, which posed a risk of fuel leaks and vehicle fires.

On May 20, GM recalled certain model-year 2015 Chevy Silverado HD vehicles and 2015 GMC Sierra HD vehicles made in January and February, because of “loose retention clips that attach the fuse block to the vehicle body,” a defect that posed an electrical risk and could result in an engine-compartment fire.

Before these recent recalls, GM truck sales had been uneven. A March assessment of the auto industry at Motley Fool noted:

Typically, fresh designs of the trucks sell better, command higher transaction prices, and improve profits. The freshest pickups are easily Chevrolet’s Silverado and GMC’s Sierra, both under General Motors’ umbrella of brands. Unfortunately for GM investors, sales haven’t picked up even with the fresh redesigns. Sales of the Silverado were down 12% in February and are down 15% for the year. Sales of the GMC Sierra are also down 6% this year.


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