Tomahawk, WI 03/19/2014 (Basicsmedia) – Vehicle recalls have been resorted to by every major global automobile manufacturer. So, when General Motors Company (NYSE:GM) recalled 1.5 million vehicles this Monday, it was not a unique event in the history of automobile manufacturers. However, GM has recalled more than 3.1 million vehicles in the last two months in the U.S. and other markets. This is far from a ‘normal’ event. The recalls have been on account of faulty ignition switches, airbag wiring harnesses, brake parts and other components.

Challenge For New CEO

The ignition-switch recall affects older General Motors Company (NYSE:GM)’s models such as the 2005-2007 Chevrolet Cobalt and 2003-2007 Saturn Ion. Other affected models include Buick Enclave, GMC Acadia crossovers, Chevrolet Traverse, Saturn Outlook, Chevrolet Express, and GMC Savana. For the CEO, Mary Barra, this is her first major crisis since being appointed the first female CEO of a major global automaker. Having started working at GM since she was 18, she should be familiar with the culture of General Motors Company (NYSE:GM).  Acknowledging the scale of the problem, she has publicly apologized even as criminal and civil investigations by government departments, congressional hearings and class-action lawsuits in the U.S. and Canada have started.

Silver Linings

The charge for the recalls works out to less than $100 per vehicle since the faulty components are minor parts. Similar recalls have happened at other global manufacturers including Toyota Motor Corp (ADR) (NYSE:TM) and Honda Motor Co Ltd (NYSE:HMC) in recent years.

General Motors Company (NYSE:GM) should leverage on its already strong global presence including in the world’s largest automotive market, China.  GM is well-placed with a strong brand portfolio including popular brands such as Cadillac, Buick, GMC and Chevrolet which are bestsellers both in the U.S. and in China. GM should focus on luxury brands in its stable such as Cadillac and work on building them into global luxury brands. In the automobile business, luxury brands (such as Audi and Porsche) bring in most of the profits for their parent company.

From an investor standpoint, these recalls do not pose a clear and imminent danger to the survival of GM. This is because the vehicle models affected by these recalls are mostly not in production any longer. Hence, there won’t be any disruptions to the assembly line leading to possible production cuts. So, General Motors Company (NYSE:GM) will be able to take that $300 million charge because of the ignition-switch related and other recalls in its stride.

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