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GM Disasters and the Aftermath: An Update on the Company’s Standings and Recovery Efforts

General Motors is still scrambling to deal with the legal, financial and public relations ramifications of the ignition switch defect that lead to the deaths of 13 people and caused the automaker to recall a record-setting number of vehicles. This has been a long, painful process for people on both sides of the problem, however, GM continues to deal with the issues that have persisted since the initial recalls. Read on for an update on where the company stands and how the future looks for them.

More Recalls

On July 23rd, GM announced another six recalls, which involve 717,950 U.S. vehicles, over various safety concerns. This is on top of the single-year record 54 recalls the automaker has already issued for 25 million other vehicles. The recalls were the first wave of quality assurance call-backs the company said it would make as part of more stringent company policies. “These recalls signify how we’ve enhanced our approach to safety,” said Jeff Boyer, Vice President of Global Vehicle Safety. “We are bringing greater rigor and discipline to our analysis and decision making.”

Compensation Fund Established For Victims

GM estimates that it will pay out at least $400 million in settlements to victims of the ignition switch defect. That number may balloon to $600 million depending on the number of people who file claims against the company. The assessment does not include costs for those who choose to forego settlement offers and sue GM. The car manufacturer has said it will fight those suits because its Chapter 11 bankruptcy restructuring, from which it emerged in 2009, protects it from prior claims.

Currently, the automaker is still being investigated by the U.S. Justice Department, the National Highway Traffic Safety Administration and the Securities and Exchange Commission. The NHTSA has already fined GM $35 million for failing to report the ignition switch issue, which the company admits it knew about as far back as 2001.

Steady Sales Despite Tarnished Image

Despite the unprecedented amount of recalls, GM posted its 18th consecutive quarterly profit based on strong sales of SUVs and pickup trucks, particularly the newly introduced 2015 Chevrolet Suburban, Chevy Tahoe and GMC Yukon. On July 24, GM reported a North American operating profit margin of 9.2 percent for the second quarter, but, after factoring in recall costs, its $1.4 billion profit was 41 percent below last year’s figure for the same period. Investors were disappointed with the automaker’s earnings, and GM stock fell by 6.33 percent to close at $35.07 for the business week ending July 25.

Overall, GM’s management feels it has weathered the storm well. “I think we’ve demonstrated resiliency as we’ve gone through this,” Mary Barra, GM CEO, said in a conference call. Recalls of this nature are never easy for companies to overcome, especially when there are deaths involved. However, GM has taken a few notes from those who have experienced devastating blows to the company like this, and plans to rise above the literal and figurative wreckage and push forward.

This article was written by Dixie Somers, a writer who loves to write for business, finance, women’s interests, and the home niches. She lives in Arizona with her husband and three beautiful daughters. Dixie got her advice and information for this article from the Orillia lawyers at Littlejohn Barristers.

Bob Kraft

I am a Dallas, Texas lawyer who has had the privilege of helping thousands of clients since 1971 in the areas of Personal Injury law and Social Security Disability.

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