Will Yesterday's Recall Hurt Sales of the 2014 Chevrolet Silverado Even More?


General Motors recalls 303,000 Silverados and Sierras. Photo credit: General Motors.

It was a slightly frustrating end to General Motors' (NYSE: GM  ) 2013, as it watched sales of its freshly redesigned Silverado plunge 16% in December while sales of Ford's (NYSE: F  ) F-Series surged 8.4%. The good news for General Motors is that the company seemed to restrain from using larger incentives to move its vehicles, making each sale more profitable, and that sales are still up more than 14% year to date -- which also trails the F-Series. The bad news is that Ford's F-Series is near the end of its life and is still selling extremely well. General Motors' launch of the Silverado, its most profitable product, has been nearly flawless until this point. However, will yesterday's recall of more than 300,000 vehicles hurt sales even more?

Fire risk recall
Recalls aren't any fun. Automakers dread them, as do car buyers, of course. Recalls are especially dreaded when fire risks are involved, which is the case in General Motors' recent recall of 303,000 redesigned 2014 Chevrolet Silverado and GMC Sierra pickup trucks. America's largest automaker confirmed that there has been eight fires, including three customer-owned vehicles, according to Automotive News -- although no injuries have been reported. 

Four of the fires were at GM dealerships, and one was in a General Motors-owned vehicle -- as such, the once troubled automaker is now urging owners of the new 2014 models to avoid leaving their trucks unattended when idling for periods of time.

The software glitch, which can lead to overheating of exhaust components and possible engine compartment fires, occurs in pickups with the 4.3-liter and 5.3-liter V-8 engines; trucks with the 6.2-liter V-8 aren't affected by this issue.

Silverado sales
The recall covers 303,000 U.S. trucks and even another nearly 70,000 pickups that were sold in Canada and Mexico. As recall letters will be mailed out on Jan. 16, customers can contact dealers to schedule a repair that takes approximately 20 minutes.

Because the repair is a quick one, and this is the first recall of the newly designed Silverado, it probably won't have an adverse impact on sales of GM's most popular product -- although it certainly won't help stir up additional sales. Sometimes it's not the amount of recalls that matters; it's how the situations are handled that determine the effect it has on sales. Consider that Ford's very popular Escape has been recalled seven times -- plagued by multiple small problems -- but has still set a record year in sales. That's mainly due to Ford's handling the recalls very quickly, appropriately, and effectively with consumers.

What GM really needs to worry about regarding sales of its most profitable vehicle is that Ford's next-generation F-150 is about to be unveiled at the North American International Auto Show next week, and it's expected to take a more revolutionary approach to its design rather than the evolutionary approach that GM has taken. Ford's taking substantial risk supposedly using significantly more aluminum in its frame to reduce weight and improve mileage. Whether Ford succeeds or flops with this strategy will be more detrimental to sales of GM's Silverado than this recall.

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Read/Post Comments (8) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 11, 2014, at 5:18 PM, TheMoogly wrote:

    Ford F-150 is the best selling truck because GM chose to market a Silverado and a Sierra. Combined Silverado and Sierra sales smoke F-150 sales by more than 70,000 units per year.

  • Report this Comment On January 11, 2014, at 6:22 PM, ckenney922 wrote:

    does this mean that Government Motors needs another bailout?

  • Report this Comment On January 11, 2014, at 6:40 PM, TMFTwoCoins wrote:

    @TheMoogly

    That's false. F-150 has outsold the Sierra and Silverado combined for the last four consecutive years. Better do some fact checking.

    Daniel

  • Report this Comment On January 11, 2014, at 7:38 PM, scottford62 wrote:

    Gov. Motor's is also offering free puppys with purchase of there new truck. So when it catches on fire you wont have to walk home by yourself. I also understand GM added tail gate warmers to there new trucks. Push a button and your tail gate heats up so hands wont get cold pushing your truck back home.

  • Report this Comment On January 11, 2014, at 10:11 PM, bluefor3 wrote:

    TheMoogly You are wrong. Some years this would be true. But not for 2013. Look up the Facts. For The Silverado in 2013 GM sold 480,414 and for the GMC Sierra184,389 for a Total of 664,803 units. The F-150 Sold a total of 763,402 units. MMMM-Kind of a difference don't ya think. A difference of 98559 Units. SO Ford sold 98559 more units than Chevy and GMC combined. You sir have it backwards. I needed to correct you so folks will not be mis-informed.

  • Report this Comment On January 12, 2014, at 9:12 AM, thatonedude1 wrote:

    This whole passive aggressive thing that the MFool has for GM is getting old and pretty transparent. It's pretty clear that they are shills for Ford at every opportunity. I'm a GM guy, but agree with most that the government should have stayed out of this issue and let GM go thru a standard bankruptcy where the union could have been neutered. But I blame the government mostly for sticking their nose where it shouldn't be.

  • Report this Comment On January 12, 2014, at 10:42 AM, TMFTwoCoins wrote:

    @thatonedude1

    It's not a passive aggressive attack on GM. The fact of the matter is, GM is a couple years behind Ford in terms of its business and vehicle portfolio turnaround and much further behind in its PR story. I convey that as honestly as possible, and point out often that I own both stocks, and am bullish on both currently.

    Thanks for reading,

    Daniel

  • Report this Comment On January 22, 2014, at 10:37 AM, elkfever wrote:

    http://blogs.cars.com/.a/6a00d83451b3c669e2019affb73904970c-...

    That should shed some light on it for you on the truck sales.

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