Skip to comments.Power Steering Recall Could Cost GM Over $1.5 Billion
Posted on 04/01/2014 9:39:04 AM PDT by jazusamo
Almost two weeks after NLPC first requested that General Motors recall vehicles with defective power steering components , the company has agreed to the recall and finally remove the dangerous vehicles from the roads. Over 1.3 million Saturn Ions and related vehicles are included in the recall, bringing the total amount of GM vehicles recalled over the past month or so to over 6 million. The total cost to GM for the recalls will be in the billions of dollars with the latest recall probably accounting for over $1.5 billion on its own. The costs to GM's reputation are even greater.
GM has known about the latest power steering defect since 2009. It appears that the issue revolves around a defective power steering assist motor supplied by JTEKT . GM sued that company back in 2009 and recalled Chevy Cobalts and Pontiac G5s in March of 2010 which had the same defective components as the models that are just now being recalled. It is important to note that the entire four year delay was during the time that "New" GM management was in control.
Regarding the latest recall cost, my research shows that the power steering columns must be replaced at a cost of approximately $1,200 per vehicle bringing the cost to over $1.5 billion. GM intends to take a charge on its upcoming earnings of $750 million for recalls during the first quarter; an amount that greatly underestimates the total cost of the recalls that seem to be coming on a daily basis. A much larger portion will likely be written off in the second quarter, when the service bills start rolling in.
GM CEO, Mary Barra, will be appearing before Congress today to try and explain why the automaker has failed repeatedly in its obligation to remove dangerous vehicles from the road. GM has known about defects in its vehicles for years and is currently being sued on multiple fronts for failing to recall vehicles with ignition switch problems that were involved in the deaths of at least 13 people. The latest power steering recall is just the latest example of GM not being trustworthy enough to recall dangerous vehicles without media attention pressuring them to do the right thing.
While GM is sure to try and appear compassionate and concerned with the safety of motorists, their actions speak otherwise. I expect Ms. Barra will, once again, explain how she is a mother and very sorry for what happened. This apologetic approach only came after a media storm which exposed how unethical and irresponsible GM has been regarding the safety of its vehicles.
For her part, Ms. Barra was the head of product development from 2011 to 2014, a time during which GM was ignoring calls from victims to recall millions of defective vehicles. That fact seems to be getting overlooked as GM apologists claim how new Barra is at her current position, implying that she has no accountability for GM's failings. The early response to the current recall scandal by Barra's new regime seemed no more ethical than past regimes.
The initial response from "New" GM when the ignition switch recall deadly delay came to light was to blame the victims for speeding and being intoxicated. Claims were made that the 13 deaths of drivers of defective vehicles occurred when motorists were driving off-road. I guess the lawyers at GM advised them that, technically, when motorists' cars swerve off the road as steering locks up, the cars can be considered to be driven "off-road." The deceptive early statement was not what I would call a "mothering" or "compassionate" response. The statement was made by GM spokesman, Alan Adler, who stated, "All of these crashes occurred off-road and at high speeds..." Mr. Adler should clarify his early statements and apologize to victims and their families.
Equally sleazy was GM's next ploy to try and sell a few extra vehicles and capitalize on the tragic loss of lives by offering drivers of defective vehicles an extra $500 off of a brand new GM car. If GM really wants to take care of its victims, it should waive its protection against claims arising before the 2009 bankruptcy process. In July of 2009, GM emerged as a new company and is protected against liability from events occurring prior to that date.
GM filed for its bankruptcy on June 1st of 2009. Just two weeks prior to that date, GM had meetings regarding the ignition switch defects which resulted in motorists' deaths. The liability arising from those cases may have been intentionally hidden from the bankruptcy court, something that the victims' lawyers will point to as they seek compensation for their clients from GM.
"New" GM is clearly responsible for events occurring after July of 2009. An argument can be made that executives from the old regime were still at the company and should now be held accountable for all of the past cases. In another attempt at compassion, Ms. Barra has directed the attorneys that are defending GM to conduct an investigation and determine just why GM has been so darn lax at recalling vehicles with deadly defects. I wouldn't expect the lawyers to be too harsh on the company.
GM also had high-level meetings regarding the ignition switch defect in 2011. As product development head, in charge of quality control, shouldn't Ms. Barra have been made aware of the critical issue? This is a point that needs to be investigated by someone other than GM's attorneys.
It will be interesting to see just how critical today's committee will be of GM. I sense that politicians are hesitant to criticize GM after Mitt Romney was lambasted for daring to discuss the shortcomings of the auto bailout process that cost taxpayers billions of dollars. Also, GM's politically-motivated leadership may have foreseen the firestorm coming and shrewdly calculated that a woman CEO would be much less likely to receive harsh criticism from politicians. If GM gets off the congressional hook for its immoral behavior, the court of public opinion should take a toll on GM when consumers decide on which carmaker they want to trust and reward when they purchase their next vehicle.
Mark Modica is an NLPC Associate Fellow.
In apparent response to our request, General Motors announced today that it would recall 1.3 million vehicles that may experience sudden power steering loss.
We made the request on March 19 after NLPC Associate Fellow Mark Modica found a glaring anomaly while examining documents on the National Highway Traffic Safety Administration (NHTSA) website. NHTSA had already ordered a recall in March 2010 of Chevy Cobalts and Pontiac G5s for the steering loss defect but three years later had not yet ordered a recall of Saturn Ions, which have the same power steering system. In my March 19 letter to GM CEO Mary Barra, I wrote, "We do not know why NHTSA has not already ordered a recall or whether politics enter into its decision-making process. It doesn't matter. You have the authority to immediately recall these vehicles."
The recall is even broader than we requested. We asked GM to recall 382,000 Saturn Ions. The recall announced today also includes the Chevy Malibu, Malibu Maxx, Chevrolet HHR, Saturn Aura and Pontiac G6, for a staggering total of 1.3 million vehicles. Although it includes many of the same vehicles, this recall is separate from the recalls for the ignition switch defect. As pointed out by Modica earlier today, the steering loss defect is far more expensive for GM to fix than the ignition switch problem, perhaps accounting for GM's slowness in ordering a recall.
Our March 19 request generated coverage by the Associated Press and Automotive News . In the interim, we repeated our request several times, including in Modica's website posting this morning titled "Congress Must Ask Barra Why GM Hasn't recalled Saturn Ions With Power Steering Loss."
No worries — it’s Government Motors. We, the taxpayers of America, will pay for this one way or another.
Actually, isn’t GM now owned by the unions?
Lawyers are going to feast on the wrongful death lawsuits.
We’ll surely pick up the tab should GM go into another bankruptcy and these recalls they ignored could help put them there again.
I think it is owned by UAW retirees now (majority)....but yes, unions.
GM...more obviously “Government Motors” than ever before. Criminal boobs.
Anyone else wondering now about the Govt. suddenly dumping the stock recently? insider trading possibly? hahahahaha
No worries its Government Motors. We, the taxpayers of America, will pay for this one way or another.
Just in time, apparently...
are there any gm cars left on the road?
True...calling obama GM needs another bailout, can’t wait get your pen out.
My wife’s Saturn Ion’s steering went out while in a parking lot a year ago. Hate to think if this had happened on the Interstate. I wrote a letter to the dealer and GM that if she had been hurt or killed by the time I was done with them I’d own the dealership. The steering unit was replaced without charge —— Big Deal! GMC has known about this for years. They deserve everything they get.
Shoot the company and put it out of its misery.
It has long been run by MBAs, financeers, politicians, and others of ill repute that did not listen to its engineers (the dumbest of whom had an IQ roughly twice the highest IQ of its leaders). And no, do not mention the pseudo-engineers who made it to the top...they did that by making sure that their lobotomy destroyed any real technical ability...how else to explain the cr*p...er....sticky Obama-stuff that oozed out of their factories.
Die, GM, die. I want to take a bodacious Obama-thing on your grave. And take the UAW with you.
GM announced toward the end of last year they were going to buy back close to 50% of the shares from the UAW retirement fund but don’t know if they did.
GM should have been broken up.
I would just point out to those bitching about the mandated back-up cameras, this kind of screw-up is what give the gov’t the idea they have to mandate stuff.
I drove a Chevies for more than 40 years, but my last GM vehicle, a Chevy Blazer, had so many problems starting within the first week I owned it, that I sold it bought my first foreign made vehicle a Mazda. My Mazda 3 with just short of 120,000 miles has had zero repairs and even the brakes and exhaust system are still factory original. The is no way I would ever by another GM product.
Considering what we know now,I think some people need to go to prison for a long time.
I heard about their bait and switch thing....somehow they are claiming they ‘paid everything back’ and ‘bought up stock’, but they NEVER paid back the Premium Bond holders they let Obama extort them out of for cents on the dollar. Nor did they EVER pay back all of the multiple loans they got.
You have to carefully watch their parsed language. In this respect, they are worse than Slick Willie.
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