Baptism of fire for Barra as GM announces $500 discount, free loaners to owners of recalled cars

Renaissance Center

As the federal government continues to investigate General Motors for the delayed recall of certain Chevrolet, Saturn and Pontiac vehicles with faulty ignition switches, the Detroit-based manufacturer has announced a $500 cash allowance for the 1.3 million American owners of affected cars. Dealers have also been instructed to issue loaner vehicles to customers concerned with the safety of their cars. The cash allowance is good on any 2013 to 2015 model year vehicle from the GM family of brands.

“GM will not market or solicit owners using this allowance,” said a notice posted by GM on the National Highway Traffic Safety Administration website, according to Automotive News. “We ask that you not market to or solicit these customers either. This allowance is not a sales tool; it is to be used to help customers in need of assistance.”

The replacement ignition switch costs just $2 to $5 and could be replaced in minutes.

The announcement was originally made on March 4, but the story broke today, shortly after The Detroit News discovered that the replacement part in the Chevy Cobalt and HHR, Pontiac G5 and Solstice, and Saturn Ion and Sky costs just $2 to $5 and could be replaced in just a few minutes. The cost of the new ignition switch was discovered in the report of a JP Morgan analyst.

“We learned from Delphi’s sell-side dinner Monday that actual cost to manufacture a replacement part could be as little as $2 to $5 each, and that labor costs to install the part would likely be low as well, considering it can be swapped out in a matter of minutes,” said analyst Ryan Brinkman’s report. According to a separate report from RBC Capital Markets, the total cost of the warranty work could hit $80 million. Repairs are expected to start in April, according to CNN.

Public sentiment, meanwhile, is (rightly, perhaps) swinging against GM. AN reports on safety advocates Clarence Ditlow and Joan Claybrook, two vocal critics of GM’s handling of this recall. Ditlow and Claybrook have now called on the manufacturer to create a $1 billion trust to compensate the victims of the 31 crashes, which included 13 deaths, due to the faulty ignition switches.

“By concealing the ignition key defect for at least 10 years, GM created more victims and then robbed them of their legal rights through the passage of time,” said Ditlow and Claybrook in a letter to GM’s CEO, Mary Barra, obtained by AN. While there’s some truth to their statement, Ditlow and Claybrook seem to forget one important fact: GM isn’t necessarily liable for incidents and decisions made before its bankruptcy. GM’s official response to Ditlow and Claybrook said as much.

“GM is focused on ensuring the safety and peace of mind of our customers involved in the recall. It is true that new GM did not assume liability for claims arising from incidents or accidents occurring prior to July 2009. Our principle throughout this process has been to the put the customer first, and that will continue to guide us.”

Ditlow and Claybrook’s letter to Barra does highlight an interesting part of this whole dilemma for GM, in that the company’s newest CEO has had something of a baptism by fire. Besides a reportedly tough launch of the new Chevy Silverado and GMC Sierra, Barra has been faced with this recall.

“The probe into the GM ignition switch problem is continuing to snowball with questions swirling about how much GM and the National Highway Traffic Safety Administration knew about the issue and when they learned it,” Kelley Blue Book senior market analyst, Jack Nerad, told Autoblog. “Some nine years have elapsed since the initial reports, begging those questions. Now with potential blood in the water, there is a gathering of interested parties to investigate potential regulatory and criminal misconduct.” Ditlow and Claybrook are two such parties.

GM is not liable under the law for things that were done before bankruptcy.

It’s easy enough for GM to shy away from the matter, though. GM is, as we said, not liable under the law for things that were done before bankruptcy. Nerad points out, though, that it’s still highly beneficial for GM to sort this mess out as quick as possible.

“While the issue does not seem to have had much effect on current GM vehicle sales, the company must come to a quick and satisfying resolution of the issue to assure that it won’t be tainted by sins of the past,” Nerad said. “The fact that GM was rescued by the American taxpayers makes a resolution that is satisfactory to the average person on the street even more imperative than if such an issue arose in another company.”

With news of this $500 cash allowance and the announcement of free loaners, though, the question can be asked as to whether GM has done enough. And that’s where you come in. Has GM’s move been enough in this recall, or should more be done? What would satisfy you as an owner of one of the recalled cars? Have your say in Comments.

Written by Lewis Shaw

Leave a Reply

Your email address will not be published. Required fields are marked *

GIPHY App Key not set. Please check settings

Is This Ride-Sharing Smart Minivan the Future of Self-Driving Cars?

California Is Rushing To Create Some Rules For Driverless Cars