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

General Motors announced a recall that covers only newly designed Silverados and Sierras -- will this hurt plunging sales even more?

Jan 11, 2014 at 12:00PM

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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Fool contributor Daniel Miller owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Jun 12, 2015 at 5:01PM

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