Car Sales Unaffected by Recall, GM


For all of the loud headlines about GM vehicle recalls, safety issues and victim reimbursement policy, the company`s most essential constituencies – investors and customers – seem unaffected. It seems that customers do not care about recalls and are not shying away from either new or used GM cars. General Motors has lately recalled about 29 million cars so far this year for safety related problems, including potentially deadly problems with defective ignition switches dating back as far as 2003.

Consumers used to punish car makers for big recalls. However, it`s not the case with GM. Perhaps even more curious is that the resale values of the vehicles affected by the initial ignition switch recall remain relatively unaffected. Recalled cars such as Chevrolet Malibu have retained or even increased in value compared with rival cars. Sales of brand new vehicles are accelerating as well despite the burgeoning brouhaha. The automaker has posted its best June sales in the U.S since 2007. In total, GM gained market share with its stock price rising 5 percent. The takeaway may be that investors suppose the blow to GM`s reputation and balance sheet won`t affect its ability to design and sell good vehicles.

Among the main reasons why consumers still continue to trust GM, the experts point out the fact that General Motor`s newer vehicles usually score much higher in quality surveys. Moreover, consumers don`t always associate General Motors with the Buick, Chevrolet, Lincoln and GMC brands.

At least, it was the case until the automaker expanded its recall campaign to add another 8 million vehicles to the ignition switch recall list, with many of these models currently sitting in the showrooms. The lack of any essential negative impact on the automaker, both in terms stock price and new vehicle sales, was easy to understand given the above factors. Will this latest recall campaign break that trend? There can be definite answer to it, though it can be assumed that the high quality of GM’s new cars, the diligent nature of Mary Barra’s plan to address these safety issues once and for all, and the comprehensive approach of GM’s just-announced reimbursement plan for victims might prevent the negative blow to GM reputation, even given the unprecedented number of recalled cars.

Car dealers are not legally obliged to tell consumers that vehicles they want to buy are covered by recall. However, the GM recall crisis has highlighted for lawmakers the risk of a buyer-beware policy – and it looks likely that Congress will try to bar dealers from selling used cars without certain precautions.

If you were defrauded by car dealer or bought a new car, which you suspect to be a lemon, don`t hesitate to contact Hovanes Margarian at (818) 926-4319 to claim your FREE consultation.

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