General Motors says compensating victims of its faulty ignition switches will cost $400-600 million, maybe more. That doesn’t include repairs and other costs associated with multiple GM recalls. The company’s recall crisis isn’t readily apparent in auto sales numbers. New GM cars are selling well, without the company having to offer big incentives.
“It’s amazing. General Motors would have had an outstanding quarter had it not been for all of the costs associated with the recalls,” says AutoTrader senior analyst Michelle Krebs.
Car industry watchers credit GM’s improved public relations response after early bumbling. But not everyone is impressed.
“If I were grading them in my class, they’d get a low pass, which is sort of the equivalent of a D,” says Paul Argenti, who teaches corporate communications at Dartmouth’s Tuck School of Business.
He wants to see the company better explain how it’s going to change a corporate culture that led to serious, deadly engineering flaws getting on the road. That goes beyond a simple PR response. It’s a real leadership challenge for CEO Mary Barra. Breaking decades of bad habits is a lot harder than fixing an ignition switch.
“All of what she’s doing and all of what she says will go for naught if a year from now, it’s business as usual,” says auto analyst Maryann Keller.