GM auto sales rev higher despite recall woes

Jeff Macke

Members of a House committee grilled General Motors’ (GM) CEO Mary Barra yesterday over why it took the company a decade to issue a recall for a defect now linked to 13 deaths. During the examination House member Diane DeGette claimed the company could have replaced a faulty ignition components in question for 57-cents but decided there wasn’t an “acceptable business case” for doing so.

Barra has repeatedly apologized for the defects and did so again yesterday before offering assurances that the the company has changed on a fundamental basis since undergoing bankruptcy in 2009.

“I think in the past we had more of a cost culture,” said Barra who ascended to CEO three months ago after spending the last three decades at GM. “If (cost) is the reason the decision was made, that is not acceptable. That is not the way we do business today.”

GM has recalled 2.6 million vehicles since February but it’s hardly alone. Earlier today Chrysler announced a recall of 870,000 SUVs. On March 20th Toyota (TM) paid $1.2 billion to settle criminal claims in 2009 unintended acceleration problems that led to more than 8 million recalls.

Strong Sales

Suprisingly enough, GM's March sales figures beat industry expectations by a wide margin. GM reported sales were up 4% for the month compared to last year, whereas industry analysts had expected a more modest 1% gain. The results were 15% above what GM reported for last month, when inclement weather hurt car purchases across the country.

Broken down by GM's brands, sales increased 13.4% at Buick, 7.4% at GMC and 3.3% at Chevrolet, while sales fell 6.3% at Cadillac. Both cars and light trucks did well too, as the Buick Regal saw a massive sales jump of 51%, the Chevrolet Cruze compact sedan was up 14%, while the Cadillac SRX luxury crossover gained 23.6% and the Chevrolet Silverado pickup added 6.8%.

In the attached video David Lutz of Stifel says the strong sales are evidence of consumer strength trumping negative headlines for GM. “It feels like the consumer is starting to open their wallet a little bit,” says Lutz. “The average transaction price was up over 2% year over year, roughly $32,000 in March.” Overall auto sales in March rose more than expected nationwide. Sales rose to annual rate of 16.4 million in March, more than 7% higher than last year and comfortably ahead of estimates.

Lutz also notes that luxury brands led the way in sales growth with Mercedes, BMW and Land Rovers all trending above industry growth.

When given the choice between what consumers say and how they act, follow the money. Given every reason in the world to avoid the dealerships Americans are buying cars at the highest clip since 2007.

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