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General Motors Faces Another Brand Image Hit

By Daniel Miller - Mar 11, 2014 at 3:00PM

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General Motors is still trying to complete its turnaround after filing for bankruptcy years ago, but it faces another brand image hit with its recent recall.

The Dow Jones Industrial Average ( ^DJI ) was trading a 82 points lower today in midafternoon while investors keep a watchful eye on the tension between Ukraine and Russia.

"Market players remain cautious. There's a lack of enthusiasm in chasing stocks, and some are just thinking about moving to the sidelines after the roller-coaster ride we've had since the start of the year," said Guillaume Dumans, co-head of research firm 2Bremans, according to Reuters.

While volatility is certainly the name of the game in the markets recently, investors would be wise to keep a long-term viewpoint and take these ups and downs with a grain of salt. With that in mind, here are some companies making headlines today

Outside of the Dow, General Motors ( GM 0.33% ) is still in the middle innings of its turnaround after filing for bankruptcy in 2009, and a recent recall of roughly 1.6 million vehicles won't help the brand's image.The U.S. House Energy and Commerce Committee announced earlier this week it had launched an investigation into the response by GM and the National Highway Traffic Safety Administration into safety concerns regarding several vehicles. At least 13 deaths have been linked to the recall which revolves around ignition switches that reportedly have been a point of concern for more than 10 years.

"Here we are over a decade later, faced with accidents and tragedies, and significant questions need to be answered," panel Chairman Fred Upton (R-Mich.) said in a statement. "Did the company or regulators miss something that could have flagged these problems sooner? Americans deserve to have the peace of mind that they are safe behind the wheel."

General Motors could be fined as much as $35 million, which would be the highest amount to date by the U.S., according to Automotive News, although it pales in comparison to the lives potentially at stake. Newly crowned CEO Mary Barra's, as well as GM's, reputation is now on the line to solve any potential problems before anyone else is hurt – and the company has so far taken quick action to address the situation.

In less dire automotive industry news, Volkswagen's ( VWAGY 4.63% ) Audi luxury brand has officially delivered more cars than BMW ( BAMXF 2.34% ) through the first two months of 2014 to become the world's best-selling luxury automaker. That title could change hands often as the race is neck and neck; consider that Audi sold 242,400 vehicles through February, which was only 383 more than BMW.

"Competition in the premium segment is more intense than ever," Audi Chief Executive Officer Rupert Stadler said in an Automotive News report. "We're ahead of our two main rivals in the first two months, but this doesn't really interest me much. Our focus is on further growth."

Luxury lineups are critical for global automakers these days and are one reason Detroit automakers' resurgence remains incomplete. Ford faces a long uphill battle to revive its puttering Lincoln luxury brand, although the redesigned MKZ has sold well and the MKC is expected to do likewise when it hits showrooms soon. GM has had more success with its Cadillac lineup and is focusing on improving its brand image in the U.S., as well as expanding sales in the world's largest automotive market: China. Though the two largest Detroit automakers are far from catching Audi and BMW in luxury sales, it will be a critical point for investors to watch throughout the remainder of the decade.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
General Motors Company Stock Quote
General Motors Company
GM
$58.06 (0.33%) $0.19
Volkswagen Aktiengesellschaft Stock Quote
Volkswagen Aktiengesellschaft
VWAGY
$29.14 (4.63%) $1.29
Bayerische Motoren Werke Aktiengesellschaft Stock Quote
Bayerische Motoren Werke Aktiengesellschaft
BAMXF
$98.75 (2.34%) $2.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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