GM Recalls Another 1.5 Million Cars; Halts Sales Until "Solution" Completed

Tyler Durden's picture




 

General Motors is in trouble. On the heels of a 1.3 million car recall over fault ignition switches (that allegedly caused 12 deaths and could have been fixed with a $1 part), the bailed-out car maker has announced it will take a $300 million charge in Q1 to cover costs associated with this and 3 new recalls covering an additional 1.5 million cars. As Reuters reports, unsold vehicles will be placed on a stop-delivery until development of a solution has been completed. Why is this such a problem? Because GM's channel-stuffed dealer inventory is already at all-time record highs as the entire industry projected the sales to continue ad infinitum and inventory-to-sales surged to near-record highs.

 

Via WSJ,

General Motors Co. said it would take a $300 million first-quarter charge to cover costs associated with its faulty ignition switch recall and three new recalls announced Monday covering about 1.5 million different vehicles.

 

The auto maker recalled 1.18 million sport-utility vehicles with model years dating back as far as 2008 over seat air bag issues. The air bags may not deploy because of a wiring problem. Separately, the auto maker also is recalling 63,900 of a Cadillac model and 303,000 vans.

 

The announcement comes as GM begins the process of offering repairs to 1.3 million vehicle owners in the U.S. who are affected by a faulty ignition switch recall GM announced in February. The auto maker is in the midst of answering lawmakers and federal authorities over why it took GM nearly a decade to initiate that recall. The switches have been linked to 12 deaths.

 

...

 

On Friday, the Detroit automaker was hit with what appeared to be the first lawsuit related to the ignition-switch recall, as customers claimed their vehicles lost value because of the ignition switch problems. The proposed class action was filed in a Texas federal court.

And all this as inventories surge to record highs...

This was an increase from the 780,140 in January and is the largest ever channel stuffing print yet recorded by the post-bankruptcy GM in history.

Good luck liquidating all that pent up inventory without major incentives and margin crushing price reductions for the everyone in the distribution chain.

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Mon, 03/17/2014 - 14:51 | 4559876 Soul Glow
Soul Glow's picture

Honda did a 1m recall this weekend too.

Honda recalling Odyssey minivans due to fire risk:

http://www.latimes.com/business/autos/la-fi-hy-autos-honda-recall-odyssey-minivans-20140317,0,7338708.story#ixzz2wFPpBXBE

Mon, 03/17/2014 - 14:56 | 4559915 TruthInSunshine
TruthInSunshine's picture

If you need a new vehicle and plan on buying one from any of the largest 6 global manufacturers, wait a while longer if you are able to - the longer you wait, the more your patience will be rewarded.

A little industry insider birdie has leaked an internal memo on a trade group forum (paywall) dealing with real time inventory, and let's just suffice it to state that the channels are being stuffed to the extreme, and that manufacturers from GM to Honda to Hyundai, VW and Ford are going to have to make some decisions quickly about whether to idle assembly lines for extraordinary periods.

Mon, 03/17/2014 - 14:59 | 4559931 john39
john39's picture

was driving around yesterday and noticed at least a hundred brand new cars with stickers, parked in an all but abandoned furniture store parking lot, miles away from any car dealer.  likely additional evidence of epic channel stuffing.

Mon, 03/17/2014 - 15:08 | 4559993 Skateboarder
Skateboarder's picture

Can I interest you in 0% APR + 10K 'cashback' + a free tank of gas? Don't mind the accelerator - it gets stuck sometimes. Totally within spec.

Mon, 03/17/2014 - 15:14 | 4560015 krispkritter
krispkritter's picture

Throw in a gun and a case of ammo or two and I might bite.

Old: http://abcnews.go.com/Business/buy-truck-free-ak-47/story?id=12184936

Mon, 03/17/2014 - 15:42 | 4560180 Manthong
Manthong's picture

It's just a good thing that most of those cars are still on the dealer's lots.

Mon, 03/17/2014 - 16:50 | 4560498 SokPOTUS
SokPOTUS's picture

I just saw that too...  Almost 200 new stickered cars and trucks in the parking lot of a car dealership that has been closed at least six years.  The dealership is still closed; weeds had been growing up through the pavement cracks; but now the lot is filled to capacity; down the sides and around back.  It had been two months since I had passed that way, the lot was completely empty as per the half-decade-plus normal at that time.

Mon, 03/17/2014 - 18:07 | 4560823 NotApplicable
NotApplicable's picture

Every dealer now has at least one satellite lot. It's the only thing keeping the local bowling alley afloat.

I'm pretty sure anytime a new restaurant opens up, the nearest car dealer starts salivating about having a new parking lot to rent in six months.

Mon, 03/17/2014 - 15:03 | 4559959 pupdog1
pupdog1's picture

A drive past my local ginormous Toyota dealer bears out exactly what you say.

The place is the size of a football field, and every square inch is packed with massively overpriced, bloated cars.

Mon, 03/17/2014 - 15:05 | 4559974 Soul Glow
Soul Glow's picture

Obama should print more money, then hand it out to everyone and we can buy all the cars from the corporations and then we can all drive around in circles and that will create jobs and then we will have achieved economic prorperity once again and we'll all be rich!

Mon, 03/17/2014 - 15:10 | 4560003 krispkritter
krispkritter's picture

The last time they tried that gas nearly doubled I think.  I suppose if we had cars and couldn't afford the gas we'd at least have somewhere to live when the house was repossessed.

Mon, 03/17/2014 - 15:47 | 4560212 Manthong
Manthong's picture

The only other other things to do is sell off the SPR at $20.00 a barrel, stop exporting oil and gas and lower our pump price to 39.9. 

It makes as much sense as anything else he does.

Mon, 03/17/2014 - 16:52 | 4560509 SokPOTUS
SokPOTUS's picture

Pfft.  You can get a used double-wide cheaper; and you get an indoor sh*tter included free. 

Mon, 03/17/2014 - 14:57 | 4559919 HoofHearted
HoofHearted's picture

Oh, this is great for GM. Now they don't have to worry about channel stuffing any more. They can simply keep all those extra cars at the factory, especially since there is probably no space at dealerships any more. And when asked why there are millions of cars sitting on lots and at their factories, they can just say, "We're being prudent to make sure we have safe vehicles."

Someone must have thought this shit up so they can save GM AND allow for a Keynesian wet dream!!!

Mon, 03/17/2014 - 15:00 | 4559940 Stoploss
Stoploss's picture

There is definitely going to be some channel stuffing happening.

Mon, 03/17/2014 - 16:55 | 4560520 SokPOTUS
SokPOTUS's picture

Cash for Clunkers II.  Just add an extra two steps at the end of the assembly line; one station fills the new vehicle gas tank with sand and runs the engine until it freezes up; then the next station crushes the vehicle.

Full Employment for all!

 

Mon, 03/17/2014 - 14:59 | 4559925 Hippocratic Oaf
Hippocratic Oaf's picture

GM needs to roll over.

They're already dead.

I'm getting a large SUV rental in Myrtle Beach. The agent at Budget told me I'll probably get a Tahoe.

I asked him......'did you have anything else?'

Mon, 03/17/2014 - 15:47 | 4560184 Againstthelie
Againstthelie's picture

That's late justice. During the financial crisis the MSM pushed the lie about dangerous Toyotas, accelerating on their own - while GM (Government Motors) was falling into an abyss.

Later this proved a typical lie to support US business. Since then, when Japanese manufacturers that really care about quality make recalls, the MSM is always reporting about it. They even try to turn this excellent behaviour into something bad, an indication of bad quality. That most recalls are not even necessary (I'm talking about Toyota) and are only a result of the high quality standards, the sheeple shall never know.

But when GM drivers die like flies in US cars with EXTREME safety problems, then they keep very silent - all over the world, btw.

Mon, 03/17/2014 - 17:10 | 4560584 DrunkenMonkey
DrunkenMonkey's picture

Yes, we can copy the Japanese manufacturing / logisitcs techniques and technology, but Total Quality Management is harder to nail down.

Mon, 03/17/2014 - 20:32 | 4561318 post turtle saver
post turtle saver's picture

yes, we can copy the very thing that we taught to the Japanese

Tue, 03/18/2014 - 00:38 | 4561938 Abbie Normal
Abbie Normal's picture

but somehow forgot to do ourselves

Tue, 03/18/2014 - 02:04 | 4562032 StychoKiller
StychoKiller's picture

TQM involves a lot of dedication and pride from the workers -- I don't think those are UAW values.

Mon, 03/17/2014 - 15:49 | 4560219 g'kar
g'kar's picture

"Honda did a 1m recall this weekend too."

 

So what....I don't recall Honda buttfucking bondholders while getting a taxpayer bailout to bail out the union pension plan.

Mon, 03/17/2014 - 18:09 | 4560835 NotApplicable
NotApplicable's picture

Not only that, I had the local Honda dealer calling repeatedly to get my recall work done.

On an 11 year old Civic.

Mon, 03/17/2014 - 14:50 | 4559881 q99x2
q99x2's picture

Broken window theory.

Mon, 03/17/2014 - 14:52 | 4559893 Wage Slave
Wage Slave's picture

Might as well just rename it the parable of Cash For Clunkers.

Mon, 03/17/2014 - 14:51 | 4559887 666
666's picture

Government Motors probably didn't want to issue a recall while the US taxpayers still owned shares in the company because they would lose value. Once the shares were sold, it became OK to consider the poor people who are injured or dead from the crappy product. It's all about insider trading.

Mon, 03/17/2014 - 15:45 | 4560191 the not so migh...
the not so mighty maximiza's picture

sounds like a felony

Mon, 03/17/2014 - 16:56 | 4560528 SokPOTUS
SokPOTUS's picture

Silly rabbit.  Laws are for kids.

Mon, 03/17/2014 - 14:52 | 4559891 free_lunch
free_lunch's picture

As it happens channel stuffing is also mentioned in this 'must read' article on KWN:

"Today a man who has been involved in the financial markets for 50 years spoke warned King World News readers that the West is controlling markets in order to keep confidence from collapsing.  He also discussed gold, and the dangerous situation facing China, Russia, and Ukraine.  Below is what John Embry had to say."  continue reading

Mon, 03/17/2014 - 15:58 | 4560269 Hal n back
Hal n back's picture

I wonder how the embry's and a few others like being called 50 year vets in their "must reads"-just asking.

Mon, 03/17/2014 - 14:54 | 4559901 NoDebt
NoDebt's picture

Haulting deliveries should do wonders for that inventory backlog.  

I smell "rebate technology" being heavily utlized in the 2nd quarter.

Mon, 03/17/2014 - 14:54 | 4559905 Amish Hacker
Amish Hacker's picture

On the positive side, most of the cars that need the $1 part are already sitting on dealers' lots, so it should be easy to find them.

Mon, 03/17/2014 - 14:59 | 4559932 Wage Slave
Wage Slave's picture

Properly Functioning Solenoids™. Ask for them by name.

Mon, 03/17/2014 - 14:58 | 4559924 Tsar Pointless
Tsar Pointless's picture

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!

ROTFLMGDMFAO!

Bullish. Bitchez.

Mon, 03/17/2014 - 14:58 | 4559927 pupdog1
pupdog1's picture

So, the cars could easily turn themselves off while under way, and the GM executive suite knew about it years in advance of the recall.

After being caught, they won't even sell new cars until it's fixed because it is so serious?

WHY IS THERE NO CRIMINAL LIABILITY FOR THOSE EXECUTIVES IN THE RESULTING DEATHS?

If these profiteering motherfuckers spent 15 years in Club Fed getting fudge-packed by Bubba on a daily basis, do you think there would ever be this sort of problem again?

Mon, 03/17/2014 - 15:06 | 4559978 NoDebt
NoDebt's picture

Can't.  Jails too full.  You'd have to release a bunch of Joe Schmoes who happened to wander through a DUI checkpoint a couple ticks over the legal limit in order to make room for them.  And THAT'S never going to happen, obviously.

Mon, 03/17/2014 - 18:13 | 4560849 NotApplicable
NotApplicable's picture

You mean those DUI checkpoints that are funded by Uncle Sugar, which allow all of those brave police officers to earn overtime for harrassing innocent people, all so they can pad their average salary for their final three years before retiring on a bloated pension?

Yep, those will never go away. Think of the children!

Mon, 03/17/2014 - 15:25 | 4560081 msmith9962
msmith9962's picture

Also, you may need to steer with the volume knob on the stereo while you wait for the vehicle to roll to a stop.

Mon, 03/17/2014 - 15:01 | 4559945 Dr. Engali
Dr. Engali's picture

Ironic..... Seems to me that Everyman had a job related to this subject matter.

Mon, 03/17/2014 - 15:02 | 4559950 Clowns on Acid
Clowns on Acid's picture

But GM has the 1st female CEO in car industry ever ! She has apologized....WTF else do you want ?

Mon, 03/17/2014 - 15:02 | 4559953 A Lunatic
A Lunatic's picture

Sign up for Obamacare and get a free GM vehicle. Problem(s) solved.......

Mon, 03/17/2014 - 15:03 | 4559957 Seasmoke
Seasmoke's picture

When the wheels are about to fall off. Put a girl in charge.

/S.

Mon, 03/17/2014 - 15:04 | 4559967 Dr. Kenneth Noi...
Dr. Kenneth Noisewater's picture

Hey, at least she's white!

Mon, 03/17/2014 - 15:27 | 4560094 saints51
saints51's picture

cough cough...federal reserve...cough

Mon, 03/17/2014 - 15:04 | 4559963 drinkin koolaid
drinkin koolaid's picture

It's the weather!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Mon, 03/17/2014 - 15:06 | 4559968 SgtShaftoe
SgtShaftoe's picture

GM has become the modern day Trabant.

 

With its poor performance, outdated and inefficient two-stroke engine (which returned poor fuel economy for the car's size and produced smoky exhaust), and production shortages, the Trabant is often cited as an example of the disadvantages of centralized planning; on the other hand, it is also regarded with derisive affection as a symbol of the extinct former East Germany and of the fall of communism (in former West Germany, as many East Germans streamed into West Berlin and West Germany in their Trabants after the opening of the Berlin Wall in 1989.

Because the car lacked a fuel pump, the fuel tank was placed above the motor in the engine compartment so that fuel could be fed to the carburetor by gravity; a trade-off of this design was an increased fire risk in front-end accidents. Earlier models had no fuel gauge; a dipstick was inserted into the tank to determine how much fuel remained.

https://en.wikipedia.org/wiki/Trabant

Mon, 03/17/2014 - 15:05 | 4559975 caShOnlY
caShOnlY's picture

this is exactly why GM has shtty resale value.  They overproduce to keep profits high and then offer money losing incentives to get rid of them.  

side note:  I know 2 guys that bought Dodge Rams late last year.  Both were hemmified 4x4s, neither had leather.   One paid 28k the other 44k(sticker).   The 44k guy taked with the 28k guy and said "you a fukking liar and you know it".  

Guess which guy had the college degree? if you said the clown that paid 44k, your right!!  he is "EDJUMACATED".

Mon, 03/17/2014 - 20:53 | 4561393 post turtle saver
post turtle saver's picture

if you absolutely positively have to buy new...

- pick a vehicle that has very few if any option choices; that means what you want will most likely be on the lot already

- find out msrp and invoice for what you want; calculate the holdback at 3% of msrp and subtract that result from invoice

- figure out how much you have to spend ahead of time; this will be a combo of estimated sale value of your current ride (if any) and the remainder needed to cover how much you're willing to spend; if you can, use cash only for the remainder

- if you must do financing, get it done ahead of time for the amount needed to cover what you're willing to spend (which equals sale value of current ride + cash down + amount financed)

- wait for end of month *and* end of quarter before talking to the various internet sales reps (this is key; you can go to a stealership and look but do NOT deal with the reps on the lot unless and only if they're willing to let you walk to the on-line rep)

- make an offer on what you want to buy that's around 1 to 2% less than the money you actually have available to spend (see above for that number); if you're caught haggling do NOT go higher than your number under any circumstances

- work with internet reps until you find one that will at least sell to you for what you want to spend; if you find one right off the bat that is willing to sell for what you are willing to spend minus 2%, stop right there and go back and redo your homework on msrp, invoice, and holdback because you've started off too high (otherwise they won't jump on it immediately); if you find yourself haggling in the window between "willing - 2%" and "willing" then odds are good you're in the ballpark

if you play things right you can shave as much as 20% off the advertised MSRP of a brand new shiny car

if you're buying used, find a wholesale auction buddy and pay them a fee to find what you want... you won't do better on used than that

Mon, 03/17/2014 - 15:05 | 4559977 centerline
centerline's picture

Dealers probably going to okay here.  When people bring thier cars in for warranty work (assuming they have a few miles on them) the dealers are bound to sell lots of folks on other services (rotating door handles, blinker fluid, etc.).

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