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When Will GM's Recall Mess End?

GM recalled another 2.42 million vehicles on Tuesday, including over 1,000 brand-new 2015 Cadillac Escalades. Source: General Motors.

General Motors (NYSE: GM  ) on Tuesday said it is recalling about 2.4 million additional vehicles in four separate recalls for a variety of problems, including faulty seat belts and gearshift troubles.

This announcement came on the heels of another set of GM recalls, announced last Thursday, covering 2.7 million vehicles. Including the four recalls announced on Tuesday, GM has issued a total of 30 recalls in the U.S. so far in 2014, encompassing about 13.8 million vehicles. 

That's a stupendous number. 

Recalls are part of doing business for any automaker, but not in this quantity. Between 2009 and 2013, GM recalled an average of about 1.8 million vehicles a year. 

What's the deal?

Recall after recall while the whole world watches
Of course, this isn't an ordinary year for General Motors. Since GM in February announced a long-delayed recall of vehicles with defective ignition switches blamed for at least 13 deaths, its safety procedures have been under intense scrutiny.

GM CEO Mary Barra appeared before the U.S. Senate Commerce Science and Transportation Subcommittee in April to address the recall scandal. She spent hours answering harsh questions. Source: General Motors.

That scrutiny has included harsh congressional inquiries, class action lawsuits, and a $35 million dollar fine to settle a federal safety investigation -- and there's almost certainly more trouble to come.

Mary Barra was promoted General Motors CEO in January, to great fanfare -- but quickly became immersed in this growing scandal. She has been learning as she goes, but appears to have gotten some good advice, including this: If there's any chance there's another problem lurking deep inside General Motors, get it out now.

So GM's recall machinery has swung into overdrive. That machinery, recently enhanced by the appointment of senior engineer Jeff Boyer as GM's first-ever vice president of global vehicle safety, has been cranking out recall after recall for several weeks now.

So far, the repercussions from the recall drama don't appear to have hurt GM's sales. But the costs of the recalls have hurt the company's profit, to the tune of $1.3 billion last quarter -- and GM warned on Tuesday that it expects to take another charge of up to $400 million on its second-quarter earnings.

When does it end?

A damage-control plan with an uncertain end
When it comes to lessons, Barra and GM have learned this from Toyota's (NYSE: TM  ) recall mess a few years ago: The sooner you deal with it, the sooner you can recover.

GM may have been inexcusably slow to face up to the problem, but the pace of activity has greatly accelerated recently. Barra and her team of crisis advisors have taken a lot of action in recent weeks, with more expected to follow.

The automaker didn't engage in a long battle with the National Highway Traffic Safety Administration; it took its lumps and agreed to pay the stiffest fine allowed by current law. (More significantly, it agreed to NHTSA oversight of its internal safety review processes.)

GM is known to be exploring the idea of a big settlement with victims of the ignition-switch defect, led by Kenneth Feinberg, the attorney who managed settlement funds for victims of the Sept. 11 terrorist attacks and the Boston Marathon bombings. It's also conducting a massive internal investigation, led by former U.S. Attorney Anton Valukas, that -- it hopes -- will explain Exactly What Went Wrong.

And apparently, it's recalling everything that might possibly look even a little bit like a defect -- an effort that might continue well into the summer, say analysts.

So to answer the question, it's impossible to say when this all will end. Barra is doing her best to make it end sooner rather than later, but it might be months before this scandal starts to fade from the headlines.

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Read/Post Comments (2) | Recommend This Article (2)

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 May 25, 2014, at 9:09 PM, funfundvierzig wrote:

    Ms. Barra and her "leadership" TEAM continue to be evasive and secretive, for example clinging to the fake figure of "13 deaths" from their deadly defective switches, when reliable research indicates a much higher number of crashes and higher death rate.

    In addition, her secret internal "investigation" is controlled and paid for by GM Management. Conflict of interest? You betcha. ...funfun..

  • Report this Comment On May 25, 2014, at 11:10 PM, thedawg60 wrote:

    i read a articlce yesterday that the total death count is 303.Something GM does not want Johnny know,Seems i do not have to believe the 303 count

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John Rosevear

John Rosevear is the Fool's Senior Auto Specialist. John has been writing about the auto business and investing for over 20 years, and for The Motley Fool since 2007.

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