The trading of the shares of General Motors Company (NYSE:GM) was temporarily halted today after the automaker announced that its charges for the second quarter related to recall expenses will increase as much as $1.2 billion.
Overall, General Motors Company (NYSE:GM) expects to write-down $2.5 billion related to recall expenses for the first half of this year including the $1.3 billion from the first quarter and $1.2 billion from the second quarter.
The stock resumed trading after the announcement. The shares of General Motors Company (NYSE:GM) declined by nearly 1% to $36.20 per share today.
The automaker announced six safety recalls involving 7.6 million U.S. vehicles. According to General Motors Company (NYSE:GM), the recalls were linked to seven crashes, eight injuries and three fatalities.
The automaker already recalled a total of about 25 million vehicles in the United States.
Last week, Mary Barra, chief executive officer of General Motors Company (NYSE:GM) indicated the possibility of more recalls since the automaker’s review of safety issues involving older vehicles is not yet completed. According to her, “We are going to continue to look at the data we get, and we are going to take the action that we need…If we find an issue, we’re going to deal with it.”
GM: Defective ignition switch made in China
General Motors Company (NYSE:GM) said the latest recalls include Chevrolet Malibu 1997 to 2005 and Cadillac CTS model 2003 to 2014 due to “unintended ignition key rotation.” The problem is similar to the defective ignition switches involving the delayed recall of 2.6 million Chevy Cobalt, Saturn Ions and other vehicles that led the company to allocate a compensation fund for the families of those injured and lost their lives.
Last week, General Motors Company (NYSE:GM) recalled approximately 3.4 million Chevrolet Impala, Monte Carlo, Buick LaCrosse, Lucerne, Cadillac Deville and DTS cars due to a similar defective ignition switch. The automaker also revealed that the faulty ignition switches were made in China.
In addition, the automaker also recalled at least 33,000 vehicles with faulty air-bags supplied by Takata Corporation (TYO:7312).
Canadian dealers filed lawsuit against General Motors
Separately, General Motors Company (NYSE:GM) is facing a lawsuit filed by a group of dealers in Toronto, Canada on allegations that the automaker failed to provide them with enough financial support despite receiving billions of dollars in taxpayers money.
The Canadian dealers emphasized that they were struggling to make a profit since General Motors Company (NYSE:GM) suffered a steep decline in market share. According to them, their sales have been weak, and they have been asking help from the automaker for years.
Other General Motors legal actions
“Today’s massive recall by GM certainly substantiates our belief that their corporate behavior will continue to depress resale values not only for those who drive recalled vehicles, but for every GM owner, a claim that we look forward to demonstrating to the court,” said Attorney Rob Carey, partner at consumer-rights law firm Hagens Berman Sobol Shapiro, in a statement to ValueWalk.
“As we learn more about how GM is orchestrating these rounds of recalls, it raises some interesting questions to their motivations, especially around their obligations to consumers for cars built before the bankruptcy,” added Carey.
Earlier this month, Hagens Berman filed a class action against GM to seek compensation based on the automaker’s damaged brand perception. If certified, the class would represent as many as 15 million GM car owners and put GM’s exposure at more than $10 billion, according to attorneys. Hagens Berman has also filed class actions regarding a variety of recalls and theories, including some that are based entirely on post-bankruptcy conduct for the alleged misinformation provided to dealers repairing consumers’ cars.