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General Motors Isn't the Only Automaker Struggling With Massive Recalls

By Daniel Miller - Mar 26, 2014 at 3:00PM

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Nissan also faces a recall of over 1 million vehicles this year.

The Dow Jones Industrial Average ( ^DJI -0.17% ) was trading 19 points lower, or 0.12%, by mid-afternoon despite a new government report showing a 2.2% month-over-month increase in February in orders for durable goods -- vehicles and other products meant to last more than three years. That was the strongest reading since November, although it was driven in large part by aircraft orders. Excluding the volatile transportation segment, durable goods orders rose only 0.2%. After adverse weather conditions seen throughout early 2014, and businesses selling through inventories, economic growth in the first quarter is expected to slow from last year's fourth quarter. With that in mind, here are some companies making headlines today.

It's been a rough go for some automakers for the first quarter of 2014. Merely a few weeks into Mary Barra's new role as CEO of General Motors ( GM -2.15% ), the company began recalling 1.6 million small cars due to a faulty ignition switch tied to at least 12 deaths. GM shares have slid roughly 15% under Barra's watch, and the problems go further than vehicle recalls.

GM hopes sales of its 2014 Silverado pick up this spring. Source: General Motors.

GM's most important vehicle, the Chevrolet Silverado, saw sales decline 15% over the first two months of the year compared to 2013. Investors are awaiting sales results for March, when the company offered its steepest discounts on the Silverado to date; if sales still struggle, it'll be a very bad sign for America's largest automaker. Also of interest to investors is General Motors' Cadillac brand, which was a big success story last year, but which has witnessed a sales decline of nearly 8% so far this year.

GM isn't the only automaker having problems early in 2014. Nissan is recalling over 1 million vehicles globally to fix a software glitch that could deactivate the front passenger airbag. The Japanese car maker is expected to begin updating the software for free by mid-April, according to the National Highway Traffic Safety Administration.

Meanwhile, despite multiple smaller recalls of Ford's ( F -3.67% ) Escape, sales continue to surge. The Blue Oval said retail registrations of the Escape are up 81% since 2009, which is higher than the overall industry growth.

"While Escape is a compact utility built for everyone and we're seeing strong sales across the board, sales are really being driven by these active adults in the 55- to 64-year-old range," said Erich Merkle, U.S. sales analyst for Ford, in a press release. "It's no secret baby boomers are playing a large role in the compact utility vehicle segment, and will continue to do so well into the foreseeable future."

What's good about this trend for Ford and its investors is that baby boomers have the cash and are looking to spend it on premium trims and technology options -- a profitable sales mix.

"Trendy baby boomers want to downsize their homes and their vehicles, but they're not willing to give up premium content in either case," said Amy Marentic, marketing manager for Ford's global car and crossover group.

Last year, Ford gained more market share in the U.S. than any other major automaker. It hopes to take even more share after GM's massive recall this year. 

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
$34,580.08 (-0.17%) $-59.71
Ford Motor Company Stock Quote
Ford Motor Company
F
$19.14 (-3.67%) $0.73
General Motors Company Stock Quote
General Motors Company
GM
$59.71 (-2.15%) $-1.31

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