By Zane Keller,
Money and Investing Writer
General Motors (NYSE:GM) announced on March 17 that it was going to recall 1.5 million vehicles in addition to the 1.2 million vehicles that it had already recalled.
Why the sudden need to recall so many of its vehicles? A faulty ignition switch, which has been a known issue by the company since 2004, caused 12 deaths according to The Washington Post.
The company has known of this issue for almost a decade, but decided not to address the issue until now. The faulty ignition switch caused the vehicle to stall, which would disable the side airbags.
CEO Mary Barra has stated that she will be as open as necessary for both governmental and internal investigations that are currently underway. The recalls are across multiple models. Models include: 2008-2013 Buick Enclave, GMC Acadia, 2009- 2013 Chevrolet Traverse, and 2008-2010 Saturn Outlook.
This will be a huge hit to General Motors because of the payments that need to be paid for on all the call backed cars, which according to CNN Money, will cost an average of $11.36 for over 2.2 million vehicles. The main concern is the possible criminal matters that need to be addressed.
Since General Motors knew about the flaw in their models which was a safety risk to its customers, should GM be held responsible? The answer is obviously yes.
A similar situation happened to Ford (NASDAQ:FORD) in the 1980’s with their Ford Pinto model. But the difference was that Ford decided that it would cost less to pay for the price of a human life than to recall all its vehicles and fix the position of the engine.
Ford’s vehicle flaw was that the oil tank was in the back of the car and would combust instantly when a vehicle was rear ended. Unfortunately for Ford, the company was sued and had to pay a large amount of damages.
But, was General Motors acting in the same unethical way as Ford had?
According to a non-profit Auto Safety Center, the death toll for the faulty ignition switch is actually up to 303 deaths, not the 12 deaths that General Motors has accepted as the toll.
CNN Money reports that the U.S. Attorney in New York has launched a criminal investigation in General Motors. This could affect the company’s stock significantly if it were to surface that GM did not act in the social responsible way that is expected of the company.
According to The Washington Post, since General Motors has had strong sales in China and is continuously growing in foreign markets, the company should be able to “weather the storm.”
The CEO even sent out a video to all the employees of General Motors, stating that the recall is a test of the company to see if it can manage this type of scrutiny and be able to still stay atop the vehicle market after the dust has settled, according to The Washington Post.
Whether General Motors can save face after such an immense recall will be whether GM can shed positive light on the company again and regain the trust of their customers.
A version of this article appeared in the Tuesday, Mar. 25 print edition.
Contact Zane at