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General Motors Company's Headache Gets Worse

The Dow Jones Industrial Average (DJINDICES: ^DJI  )  was trading 149 points higher, or 0.92%, by midafternoon after Alcoa unofficially kicked off earnings season yesterday after market close. Despite the company posting a first-quarter loss of $178 million, compared to a $149 million profit for the corresponding period last year, shares are up more than 3% today. One-time items from a production capacity reduction contributed to the loss, and the adjusted earnings per share beat Wall Street estimates. According to Thomson Reuters, S&P 500 companies' first-quarter earnings are projected to have risen only 1% from a year ago, far below initial estimates.

With earnings season under way, here are some companies making headlines.

Inside the Dow, General Electric (NYSE: GE  ) is making news as it continues to refocus its business on stronger industrial and energy portfolios. When it comes to energy, GE recently has invested in additional natural gas pipeline infrastructure. As the U.S. economy continues to invest in more natural gas products, such as locomotives, tractor-trailers, and drilling rigs, the demand for natural gas networks and pipelines should grow substantially. General Electric has more than $3 billion invested in 43,500 miles of pipeline, as well as the largest U.S. liquefied natural gas export facility and other storage sites, according to FuelFix.

"There's a lot of need for expansion capital, new pipeline in the ground to tap into and fully exploit the various shale regions," Jim Burgoyne, managing director of GE's natural resources group, told FuelFix. "It's fertile ground because there is so much development going on."

Investors continue to cheer GE's recent moves to expand its industrial and energy businesses, and the company is quickly showing up on many investor watchlists as its turnaround unfolds.

GM CEO Mary Barra in front of Senate subcommittee. Source: General Motors.

Outside of the Dow, General Motors' (NYSE: GM  ) ignition-switch fiasco continues to make major headlines. America's largest automaker's recall of nearly 2.6 million vehicles linked to at least 13 deaths will cost the company no less than $750 million in the first quarter. That's likely just scratching the surface of the total cost to be felt by the automaker, as damage to its sales and brand image is far from over.

To make General Motors' headache even worse today, Morgan Stanley analyst Adam Jonas lowered his earnings outlook for the company's first quarter and dropped his price target on GM's stock to $33 from $49. Also, in barely a slap on the wrist, the National Highway Traffic Safety Administration hit GM with a fine of $7,000 per day over its responses to a 107-question query the agency filed with the company last month, according to Automotive News

Meanwhile, competitors in the automotive industry are taking advantage of General Motors' massive recall by scheduling recalls of their own, knowing the media spotlight will remain focused on GM.

Toyota Motor announced a 6.39 million vehicle worldwide recall today, with 2.34 million of those vehicles in North America. The overall recall figure actually covers five separate technical issues ranging from faulty airbags to defective windshield wipers. Chrysler also recently announced a worldwide recall of nearly 870,000 Jeep Grand Cherokees and Dodge Durangos, while Ford recalled nearly 435,000 SUVs and cars to fix rusty frame parts or faulty seats.

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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 April 09, 2014, at 4:20 PM, pondee619 wrote:

    I had read somewhere the GM knew about the faulty ignition switches for ten years and did nothing to correct the situation.

    1. Is this true? (

    2. If it is, at what point is someone at the company liable, criminally and civily, for "at least 13 deaths"?

    "cost the company no less than $750 million in the first quarter." Aren't we forgetting that people DIED while GM failed to correct a known problem?

    "damage to its sales and brand image is far from over." People died. Where are your priorities, Fool? The financial industry wrote bad loans. GM put defective cars on the road and for ten years knowingly failed to correct the problem. People died and we are talking about "damage to its sales and brand image".

    "That NHTSA knew of the problem in 2007 and did not ever initiate a recall, however, calls some of its own credibility into question." "a total of at least 13 deaths and 31 crashes."

    And Fools talk about damage to sales and corporate image, fines and costs of recall.

    31 crashes and AT LEAST 13 deaths and GM waited ten years to start any fix. And Nero fiddled while Rome burned.

  • Report this Comment On April 09, 2014, at 4:41 PM, pondee619 wrote:

    "GM Knew About Ignition Issues 10 Years Before Issuing Recall"

    " That NHTSA knew of the problem in 2007 and did not ever initiate a recall, however, calls some of its own credibility into question"

    "General Motors Company's Headache Gets Worse"

    "cost the company no less than $750 million in the first quarter"

    "damage to its sales and brand image is far from over"

    "...fatalities that were related to the defect, for a total of at least 13 deaths and 31 crashes."

    OK, priority check,

    31 crashes

    13 DEATHS

    ten years failure to act on a known defect.

    Fools call this a "Headache" and worry about "damage to its sales and brand image".

    People died and GM fiddled. Oy, what a headache,

    The human toll and the corporate indifference is completely ignored.

    31 crashes

    13 DEATHS

    10 years of GM intentionally/knowigly doing NOTHING

    NHTSA knew of the problem in 2007 and did not ever initiate a recall untill 2014; and the Fools take:

    "cost the company no less than $750 million in the first quarter."

    People died and we talk about sales, image and money. Ten years GM knowingly did nothing. Don't we care anymore?

  • Report this Comment On April 09, 2014, at 4:42 PM, pondee619 wrote:

    sure do wish my posts would come up when I post them and not delayed, Sorry for the re-write

  • Report this Comment On April 10, 2014, at 9:13 AM, TMFTwoCoins wrote:


    No problem on the re-write, it happens. And yes, to be clear the issue of deaths, and even worse a possible cover-up, is the biggest problem. Evidence suggests GM knew of this problem much earlier than admitted, although exactly who knew and what decisions were made to overlook things are still publicly unclear.

    I have an article that was supposed to be published before this, and was delayed, that states how disappointed I am in that GM didn't step up immediately and setup a fund for families effected, rather they are "waiting" to make a decision. What decision? That drives me crazy. Sure, technically new GM can avoid damage caused by "old" gm (pre-bankruptcy) but that's not REALLY an option... GM needs to change how it's handling those families affected, and immediately.

    My apologies if the article came off overlooking families, that isn't the case in my GM focused articles; rather this was a very small chunk covering today's headlines.

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Daniel Miller

As a Motley Fool Industrial Specialist, I use my marketing and business background in the automotive industry to evaluate major automakers and other large industrial corporations. Follow me on twitter for tweets about stocks, cars, sports, and anything I find amusing.

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