Bloomberg News

GM Recalls 778,562 Cars After Defect Linked to Six Deaths (3)

February 13, 2014

A 2007 Chevrolet Cobalt

The recall covers Chevrolet Cobalt sedans from the 2005 to 2007 model years. Photographer: Mark Elias/Bloomberg

General Motors Co. (GM:US) is recalling 778,562 Chevrolet Cobalt and Pontiac G5 sedans in North America after six deaths were linked to faulty ignition switches that may have caused engines and air bags to turn off.

Key rings that are too heavy or a “jarring event” can cause the ignition switches to come out of the run position, Detroit-based GM said in a statement today. The engine may then shut off and result in a misfire of a crash-sensing algorithm.

That chain of events “may result in the air bags not deploying, increasing the potential for occupant injury in certain kinds of crashes,” GM said in the e-mailed statement. “Until this correction is performed, customers should remove non-essential items from their key ring.”

The recall will add to the early tests for Chief Executive Officer Mary Barra, who took the helm of the largest U.S. automaker last month. It’s possible additional incidents will be reported as more people hear about the Cobalt and G5 recall, said Karl Brauer, a senior analyst at Kelley Blue Book, an Irvine, California-based automotive research company.

“GM has come a long way in vehicle design and quality since those models were produced over seven years ago,” Brauer said. “Yet this another example of how potential engineering flaws from the past can come back to bite an automaker.”

GM fell (GM:US) 1 percent to $35.20 at 4 p.m. in New York after earlier declining as much as 2.3 percent. The shares gained 25 percent in the 12 months through yesterday.

Safety Sensors

The recall covers Chevrolet Cobalt and Pontiac G5 sedans from the 2005 to 2007 model years. A total of 619,122 cars will be covered in the U.S., along with 153,310 in Canada and 6,130 in Mexico.

The fatal crashes occurred off-road and at high speeds, a GM spokesman, Alan Adler, said. Airbags didn’t deploy, and the company has concluded that the sensors that activate the safety devices in a crash became impeded.

Failure to wear seat belts and alcohol use also were factors in some of the crashes, Adler said. The company is aware of 17 other crashes involving frontal impact and non-fatal injuries in which air bags didn’t deploy, he said.

Dealers will replace ignition switches on affected cars, GM said.

GM sold 9.7 million cars worldwide in 2013, up from 9.3 million in 2012, making it the world’s second-largest automaker by sales volume.

Earnings Effect

Adler declined to comment on how much the recall would cost GM or whether it’s expected to be material to the company’s earnings.

The company, which last week posted fourth-quarter profit that missed some analysts’ estimates, has said it expects modest profit gains in 2014 as improvements in operating performance in North America are offset by restructuring costs overseas.

GM’s fourth-quarter revenue rose to $40.5 billion, compared with the average analysts’ estimate of $40.9 billion, according to figures reported Feb. 6. Net income in the quarter fell to $1.04 billion from $1.19 billion.

To contact the reporters on this story: Jeff Plungis in Washington at jplungis@bloomberg.net; Tim Higgins in Detroit at thiggins21@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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