July 8, 2014 at 7:28 am

Daniel Howes

Opportunity for new sales is silver lining in GM recall

Jim Watson / Getty Images)

General Motors Co.’s recall of 29 million vehicles worldwide so far this year should mean embarrassment bordering on crisis for the automaker and its dealers.

Defective ignition switches in compact models are blamed for at least 13 deaths and more than 50 accidents. The toll is expected to be revised higher as victims present individual cases for compensation from a GM-backed fund.

But as grim and damaging as the mess is to GM and its reputation, an unintended consequence is that GM theoretically gets 29 million chances to lure prospective buyers back into showrooms and put them behind the wheels of new metal mostly free from the problems plaguing out-of-production Chevrolet Cobalts and similar vehicles.

You can’t buy that kind of traffic, as a ranking GM source and Paul Stanford, president of Les Stanford Chevrolet-Cadillac in Dearborn, put it in separate discussions over the past several days.

“That is an opportunity,” Stanford said in an interview Monday. “How do you buy that? You really can’t buy that. On the one hand, it’s been a curse to us. On the other, it’s been a blessing.”

The service department at his dealerships straddling Michigan Avenue in west Dearborn has performed 1,000 repairs on recalled vehicles, an “astronomical” amount for a shop whose work is complicated by the slow arrival of replacement parts.

“We’re just trying to manage the influx of people calling about their campaigns and recalls,” he said. “That’s caused a headache. But … it exposes some of them to our product that have not had a reason to” visit a GM showroom.

Special incentives, the allure of a new vehicle, or both, certainly can help. The automaker is offering owners of recalled vehicles a $500 credit toward the purchase of a “certified” used car or employee pricing on the purchase of a new one.

So far, roughly 5,000 customers have opted for one of the incentives, said Jim Cain, a GM spokesman. That’s a tiny fraction of the more than 250,000 vehicles GM sells each month, or the 296,000 recalled cars it has repaired as of June 25.

GM’s sales are proving resilient despite bad publicity, congressional hearings, myriad federal investigations, creation of an open-ended victims’ compensation fund and reinvigorated trial lawyers preparing to sue Detroit's No. 1 automaker for incompetence it readily acknowledges.

And yet … GM last month posted its best June sales since 2007, with retail business up 9 percent on an adjusted basis. Average transaction prices through the first six months of the year are running $2,700 per vehicle ahead of last year.

Even more important for a company poised to record a $1.2 billion charge against second-quarter earnings to pay for the ignition-switch recall scandal is the fact that sales of profit-rich fullsize SUVs — the Chevy Tahoe and Suburban, GMC Yukon and Cadillac Escalade — are sharply higher.

The revival of Buick is gaining traction, with the brand posting its best June in eight years. Cadillac, powered by its pair of SUVs and trio of ATS, CTS and XTS, delivered its best June in six years — all of it evidence that a freshened lineup financed by consistent product investment can help an automaker weather serious questions about past mistakes.

No time is a good time for a crisis simultaneously raising questions about GM’s competence, its accountability, its respect for customers. Worse, the credibility of claims that GM’s culture is breaking successfully from its bureaucratic, take-no-responsibility past is being strained by the automaker’s own admissions, starting with CEO Mary Barra.

But now is not the worst time, either: industry-wide sales are approaching the 17 million-unit mark; credit is more widely available, even for subprime borrowers; unemployment is ebbing, with payrolls expanding by 200,000 jobs for the fifth month in a row.

The average age of the nation’s vehicle fleet, more than a decade old, is fueling pent-up demand that GM, among others, is happy to satisfy. And the technological advances in new cars, in contrast to the metal GM is recalling from the middle of the last decade, makes new models at all price points even more attractive.

All of which raises a critical question for the global auto industry operating in the United States: Is the ubiquity of government-regulated recalls, reaching a new high in the unspooling GM case, steadily removing their stigma for all but the most directly (and negatively) affected?

Probably, particularly for vehicles no longer occupying space in dealer showrooms or corporate marketing campaigns. The alleged sin of recalls is not that automakers are moving sooner to notify customers of fixes to things gone wrong; it’s failing to notify customers and regulators, as GM did for nearly a decade, what needs fixing.

daniel.howes@detroitnews.com
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Daniel Howes’ column runs Tuesdays, Thursdays and Fridays