Recall risks run high for GM


The stakes are high for General Motors (GM) when execs get interviewed in front of the House Energy and Commerce Committee, notes 24/7 Wall St.

The automaker faces the risk that Congress or the courts could find gross negligence on the part of the automaker in a development that could add billions to its legal costs eventually.

A prolonged recall investigation could also dent sales if consumers question GM's safety record.

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Comments (8)
  • Mike P.
    , contributor
    Comments (83) | Send Message
     
    I am curious, why is it that GM will not go above $38.05? I know a friend who owns 500 shares at 38.01 and every time it goes up to that point, it drops back down, is that because GM is not interested in paying the $5 per cent increase or is it something else?
    11 Mar 2014, 08:44 AM Reply Like
  • Snoopy1
    , contributor
    Comments (1126) | Send Message
     
    I'm not a technician, but there's heavy resistance at $38 since July. No reason for the $38, it just is.

     

    http://bit.ly/1iwwhq5

     

    I think a lot of traders will be buying once it breaks and holds above $38. Until then, it acts as a ceiling.
    11 Mar 2014, 02:05 PM Reply Like
  • Momintn
    , contributor
    Comments (6083) | Send Message
     
    The new GM is not liable for the old GM's products. This investigation isn't going to do much to GM other than a possible fine. And we know how low fines are. Congress has such a low job approval rating that they put on these shows hoping to appear that they care about people and do something. On average, over 40,000 people die every year in car accidents in the USA. If there were a major problem with ignition switches, there would be more than 13 deaths in total. And those 13 cars include Saturns and Pontiacs that are no longer in production. All of these cars were manufactured before the new GM came into existence. The recall covers the 2005-07 Chevrolet Cobalt and Pontiac G5, 2003-07 Saturn Ion, 2006-07 Chevrolet HHR, 2006-07 Pontiac Solstice and 2007 Saturn Sky. I remember replacing ignition switches in at least 2 of our cars in the past decade that were not GM cars. I have also had cars die while I was driving because of alternators and low batteries. I have had cars die on me and I didn't run off the road. In my opinion, you want to buy GM stock on this dip.
    11 Mar 2014, 04:30 PM Reply Like
  • Momintn
    , contributor
    Comments (6083) | Send Message
     
    Under terms of its 2009 bankruptcy, GM is free from liability for injuries arising before its bankruptcy.
    11 Mar 2014, 04:37 PM Reply Like
  • Quatum73
    , contributor
    Comments (56) | Send Message
     
    Are you sure?
    11 Mar 2014, 06:21 PM Reply Like
  • Snoopy1
    , contributor
    Comments (1126) | Send Message
     
    I guess that's good news if true, but there may be some customer apprehension to GM products (similar to what Toyota experienced) and some moderate fines.

     

    That being said, I agree that GM should be bought at $35 or under as I expect the shares to be at least in the low-mid $40 in a year once we get into 2015 without the 2014 charges/investments and Europe breakeven as well as continued China progress.
    11 Mar 2014, 09:40 PM Reply Like
  • Momintn
    , contributor
    Comments (6083) | Send Message
     
    Yes it was in the bankruptcy terms. They are likely going to be fined. However from what I read the investigations were inconclusive: some accidents had ignition switch in the on position, in the accessory position, and a few in the off position. They thought the drivers may have hit the key during the accident. Some weren't wearing a seat belt. Some air bags didn't deploy and some did.
    The problem with the switch was from Delphi who improved it in 2006 but didn't change the part number, so GM was unaware that a potential problem had been corrected.
    Delphi went through bankruptcy around that time. I'd definitely get out of DLPH if I were in it.
    12 Mar 2014, 12:03 AM Reply Like
  • Momintn
    , contributor
    Comments (6083) | Send Message
     
    Read BAC/ML's report on GM.
    Unfortunate tragedy, but impact on stock likely limited ...

     

    Reserves are robust, repairs likely more than covered
    GM reserves about $500 per vehicle wholesaled for recalls and similar costs for the
    lifetime of a vehicle, which in total equates to about $3bn annually. Total reserves
    at the end of 2013 stand at about $7.2bn. We’d estimate the cost of the repair at
    less than $50 per occurrence including labor, so on a base of 1.6mm vehicles the
    total cost of repairs would be about $80mm, well below existing reserves.

     

    Vehicles no longer sold in US so impact on volume is limited...

     

    Sentiment may take time to recover...
    12 Mar 2014, 10:32 AM Reply Like
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