In the second quarter, General Motors’ earnings dropped nearly 85 percent when compared to the same quarter last year. Much of the decline has been blamed on the recall crisis that has been affecting the company for months. The current recall crisis is the worst safety crisis in the history of the company. In the past year, G.M. has issued 60 recalls that have affected nearly 30 million vehicles. In February alone, G.M. recalled nearly 2.6 million Cobalts, Saturn Ions, and other small cars.
The company is on track to spend more than $3.8 billion in vehicle repairs and compensation for accident victims related to the recall crisis. $2.5 billion has already been spent on the recalls. Another $400 million will be earmarked for compensating car owners affected by its faulty ignition switch recall. These faulty ignitions have been found to cut engine power and disable air bags. Another $874 million will be used to cover the cost of future recalls.
The company is still facing numerous legal and financial problems. The company is being investigated by 45 state attorneys general over the defective ignition switches, which are suspected to have caused at least 13 deaths and 54 accidents. G.M. is also facing investigations from the Justice Department and Securities and Exchange Commission and more than 100 class-action lawsuits have been filed against the company.
G.M.’s chief executive, Mary T. Barra, acknowledged that the company had neglected to fix the deadly defect for years. Ms. Barra has said that the company is taking responsibility for what happened and is taking steps to rectify the situation. These steps have included dismissing 15 employees for their role in the crisis, overhauling its engineering department, and improving its safety procedures.
Industry experts believe that G.M. may be dealing with the fallout for years to come. The company’s reputation took a significant hit as consumers found out that many of the recalls had been postponed for years, leaving drivers at risk for damaged cars and personal injuries. There are still many uncertainties, including whether more vehicles will be recalled in the near future, the total amount that G.M. will eventually spend on the crisis, and what the outcomes of the federal investigations will be.
