GM Profits Pancake on Recall Costs
Amid executing a recall covering 2.6 million vehicles, General Motors’ first quarter net income sank 86 percent compared to the same period a year ago.
Earlier this month, the company said it estimated the massive recall campaign that will see ignition switches and cylinders replaced in 2.6 million vehicles would cost the company roughly $1.3 billion. GM said yesterday that it already sent letters to 1.4 million owners notifying them of their inclusion in the recall and asking them to schedule a service time with a dealer.
But the call-back wasn’t the only thing that ate into General Motors’ net income in the first quarter. It also lost $400 million on the changing exchange rate in Venezuela.
SEE ALSO: GM Shipping Replacement Switches to Dealers
Compared to the first quarter of 2013, General Motors said its recall-related costs ballooned from $100 million to $1.3 billion.
“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,” said GM CEO Mary Barra. “ 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.”
That strong performance helped stave off the loss predicted by many industry analysts, allowing GM to report its 17th straight quarterly profit.
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Luke is an energetic automotive journalist who spends his time covering industry news and crawling the internet for the latest breaking story. When he isn't in the office, Luke can be found obsessively browsing used car listings, drinking scotch at his favorite bar and dreaming of what to drive next, though the list grows a lot faster than his bank account. He's always on <A title="@lukevandezande on Twitter" href="http://twitter.com/lukevandezande">Twitter</A> looking for a good car conversation. Find Luke on <A title="@lukevandezande on Twitter" href="http://twitter.com/lukevandezande">Twitter</A> and <A title="Luke on Google+" href="http://plus.google.com/112531385961538774338?rel=author">Google+</A>.
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