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Why the Cruze recall won’t hurt GM’s bottom line

Kate Davidson Jun 26, 2014
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Why the Cruze recall won’t hurt GM’s bottom line

Kate Davidson Jun 26, 2014
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This story was updated at 6:15 p.m. PT on July 26, 2014 with details on the latest General Motors recall. GM is reportedly recalling more than 29,000 Chevrolet Cruze compact cars related to metal parts in the air bag assemblies.


This might sound like a broken record, but General Motors is preparing to recall some 29,000 cars.

The Chevy Cruze is GM’s most popular passenger vehicle, second overall to the Chevy Silverado truck.

So is this finally the thing that will put a dent in GM sales? Probably not, analysts say.

GM has recalled 20 million vehicles this year, and auto analyst Maryann Keller says much of the public isn’t listening anymore. They’re too saturated with recall news.

“Consumers in general just sort of glaze over when they hear these things,” says Keller. “As long as it’s not, you know, not affecting a car that perhaps is in their driveway. Or a car that they wanted to buy.”

That’s one reason GM’s sales have just chugged along. Keller doesn’t expect this time to be any different.

GM told dealers to freeze sales of potentially problematic Cruze inventory. But Morningstar analyst David Whiston says there’s recent proof that temporarily halting sales might not matter.

Just last month, “GM did a stop delivery order on their large crossovers, like the Buick Enclave, GM Acadia, Chevy Traverse,” he says.

And you know what? GM still did well. Really well.

“In May, it was GM’s best month of sales since August of 2008. So honestly, GM’s product is just outstanding right now in all vehicle segments,” he says.

The stop-sale order won’t really hit GM’s bottom line, but the timing is bad for somebody, according to Michelle Krebs, a senior analyst with AutoTrader.com.

Even if it’s temporary, “that hurts the dealers,” she says. “Because the bulk of a month’s sales occur at the end of the month.”

It’s not just the end of the month, it’s also the end of the quarter. Now’s the time some dealers are trying to hit sales targets to get bonuses from GM. It’s a tough time to not be selling GM’s most popular car.

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