GM sales eyed for impact of ignition switch recall
MICHIGAN, USA – AS General Motors executives show off their newest cars and trucks in New York this week, analysts are watching for signs that consumers are shying away from the ones sitting on dealer lots.
Many expect GM sales to take a hit from a mishandled recall of small cars, though it’s unclear when and how severe. Any decline would hurt the automaker’s market share and potentially its credit rating. Concerned investors have sent GM stock to a 10-month low.
Data collected from dealers by J D Power and Associates show GM US sales fell 6.3 per cent in the first five days of April compared with a year ago, while the overall market dropped just 0.3 per cent. The same data show an even larger decline for Ford Motor Co. April is expected to be a rebound month in the US after a rough winter, and analysts expect sales to pick up in the month’s second half.
GM began recalling 2.6 million small cars worldwide in February to replace faulty ignition switches. The company says at least 13 deaths have been linked to the switch problem. CEO Mary Barra’s appearance before Congress this month drew even more attention to the issue.
Historically, big, highly publicised safety problems eventually affect sales, said Jesse Toprak, chief analyst for the car-buying site Cars.com. GM’s sales weren’t hurt in February or March, but data from April is starting to show weakness, Toprak said.
He said buyers trying to decide between a GM brand car and a rival “might just take GM from their consideration list, thinking that it’s not worth it.”
Jeff Schuster, senior vice-president of sales forecasting for LMC Automotive, an industry consulting firm, expects GM sales to show a gain this month, but only about half the eight per cent increase he forecasts for the industry overall. The recall might have an impact, but GM has also been struggling to match Ford and Chrysler in pickup sales, he said.
Schuster doesn’t think GM’s market share will plunge as much as Toyota’s did in 2010, when it recalled millions of cars because of unintended acceleration. The difference: GM no longer makes most of the cars it’s recalling. In 2010, Toyota was recalling cars currently on sale.
In the second half of that year, Toyota sales fell more than eight per cent. For the full year, Toyota’s share of the US market dropped 1.5 percentage points, according to Autodata Corp.
So far this year, GM’s sales are down two per cent, but its car sales have outperformed the market, rising 3.4 per cent through March. And they could be helped later this year by models being introduced at the New York International Auto Show. GM will display a freshened Chevrolet Cruze compact for 2015, a high-performance Corvette convertible and a new small SUV that gives Chevy an entry in one of the hottest-selling market segments.
A sales decline or increased use of discounts could have broader repercussions for GM. The Standard and Poor’s ratings agency last week said the recalls could prevent GM’s credit rating from returning to investment grade for the first time since 2005. The agency warned that it is watching for “any significant deterioration” in GM sales. GM’s US market share in March was 16.7 per cent, down 0.2 percentage points from a year ago.
Ford Motor Co, GM’s chief US rival, is also off to a slow start in April, according to the JD Power data, with sales down 10 per cent for the first five days.
-AP