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| GM’s 1Q profit dragged down by recalls | GM’s 1Q profit dragged down by recalls |
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| General Motors squeezed out a $100 million profit in the first three months of 2014, despite setting aside $1.3 billion to cover the cost of a huge recall to address a deadly ignition-switch defect that it has been linked to 13 deaths, the company reported Thursday. | General Motors squeezed out a $100 million profit in the first three months of 2014, despite setting aside $1.3 billion to cover the cost of a huge recall to address a deadly ignition-switch defect that it has been linked to 13 deaths, the company reported Thursday. |
| The report marked the 17th consecutive profitable quarter for the giant automaker, which has been walloped by a storm of lawsuits, federal and congressional investigations and negative publicity since it began recalling 2.6 million Chevrolet Cobalts and other small vehicles in February. | The report marked the 17th consecutive profitable quarter for the giant automaker, which has been walloped by a storm of lawsuits, federal and congressional investigations and negative publicity since it began recalling 2.6 million Chevrolet Cobalts and other small vehicles in February. |
| Still, the recall is taking a huge financial toll that is likely to grow. The company’s $100 million profit was just a fraction of the $900 million that flowed to its bottom line in the first quarter of last year. | |
| Overall, net revenue was up in the first quarter of the year, going to $27.4 billion, $500 million more than during the first quarter of 2013. | Overall, net revenue was up in the first quarter of the year, going to $27.4 billion, $500 million more than during the first quarter of 2013. |
| “The performance of our core operations was very strong this quarter, reflecting the positive response of customers to the new vehicles we are bringing to market,” GM chief executive Mary T. Barra said in a statement. “Our focus remains on creating the world’s best vehicles with the highest levels of safety, quality and customer service, while aggressively addressing our business opportunities and challenges globally.” | |
| GM has been soaring since its 2009 bankruptcy and $40 billion federal bailout that allowed it to shed burdensome legacy costs and to streamline and update its vehicle lineup. Sales have been up — increasing by 4 percent in 2013 and by 2 percent in the first quarter of this year. | GM has been soaring since its 2009 bankruptcy and $40 billion federal bailout that allowed it to shed burdensome legacy costs and to streamline and update its vehicle lineup. Sales have been up — increasing by 4 percent in 2013 and by 2 percent in the first quarter of this year. |
| But the progress being made by what Barra and others call “the new GM” is being threatened by the legacy of the “old GM,” which executives have depicted as a cash-strapped giant that fostered a culture focused more on cost savings than quality and safety. | But the progress being made by what Barra and others call “the new GM” is being threatened by the legacy of the “old GM,” which executives have depicted as a cash-strapped giant that fostered a culture focused more on cost savings than quality and safety. |
| During hearings earlier this month before the House and Senate, lawmakers grilled Barra about why GM took so long to address the ignition switch defect it knew about for more than a decade. Congressional investigators, noting that GM engineers had quietly switched out the troublesome ignition switch in 2006 without documenting the change or issuing a recall for faulty vehicles already on the road, flatly said the company was characterized by a culture of coverup. | During hearings earlier this month before the House and Senate, lawmakers grilled Barra about why GM took so long to address the ignition switch defect it knew about for more than a decade. Congressional investigators, noting that GM engineers had quietly switched out the troublesome ignition switch in 2006 without documenting the change or issuing a recall for faulty vehicles already on the road, flatly said the company was characterized by a culture of coverup. |
| Through it all, Barra took pains to separate the “new GM” focused on the customer and safety first, from the “old GM” — a distinction that failed to impress some members of Congress. | |
| “I’m very disappointed, really,” Sen. Barbara Boxer (D-Calif.) told Barra at one hearing. “As a woman to woman, I am very disappointed because the culture that you are representing here today is a culture of the status quo.” | “I’m very disappointed, really,” Sen. Barbara Boxer (D-Calif.) told Barra at one hearing. “As a woman to woman, I am very disappointed because the culture that you are representing here today is a culture of the status quo.” |
| The faulty ignition switch caused cars to inadvertently shut off, stiffening brakes and steering and causing air bags not to deploy in collisions. | The faulty ignition switch caused cars to inadvertently shut off, stiffening brakes and steering and causing air bags not to deploy in collisions. |
| The company’s slow action to address the problem has spawned dozens of lawsuits, from accident victims as well as others who say they were deceived into buying defective cars or have been hurt because the cars they own have lost value. | The company’s slow action to address the problem has spawned dozens of lawsuits, from accident victims as well as others who say they were deceived into buying defective cars or have been hurt because the cars they own have lost value. |
| GM is exploring setting up a compensation fund for accident victims. The company has hired Kenneth Feinberg, who organized efforts to compensate victims of the BP oil spill and the 2013 Boston Marathon bombing, to explore options. | GM is exploring setting up a compensation fund for accident victims. The company has hired Kenneth Feinberg, who organized efforts to compensate victims of the BP oil spill and the 2013 Boston Marathon bombing, to explore options. |
| Meanwhile, GM has been using its 2009 bankruptcy sale to try to protect itself from other possible liabilities related to the ignition-switch defect. It has asked a federal bankruptcy judge to dismiss dozens of potentially costly lawsuits filed against the company over its handling of the defect and to bar similar cases in the future. | |
| GM has explicitly said that it is not seeking protection from suits connected to accidents caused by the defective switch, which is linked to at least 31 accidents. | |
| Lawyers for victims have filed several class-action lawsuits over the ignition switches in courts around the country, including California, Illinois and Michigan. | |
| In filings in U.S. Bankruptcy Court in New York, a group of people suing GM over the ignition-switch problem has asked a federal judge to prevent the automaker from using the bankruptcy as a shield from lawsuits. Lawyers for the plaintiffs argue that GM forfeited its right from liability protection in bankruptcy by not disclosing information about the faulty switch to the Bankruptcy Court during its quick court-supervised sale. | |
| In the wake of the recall debacle, Barra has appointed a top company official to oversee safety problems. GM said earlier this week it would more than double to 55 a team of safety investigators working within engineering and would require its legal department to regularly brief engineering on legal complaints involving its vehicles. | In the wake of the recall debacle, Barra has appointed a top company official to oversee safety problems. GM said earlier this week it would more than double to 55 a team of safety investigators working within engineering and would require its legal department to regularly brief engineering on legal complaints involving its vehicles. |
| GM has shipped thousands of repair kits for the recall. | |