General Motors (GM) Shares Gain despite 63 Death Claims

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Overall market improvement drove the share price of General Motors Co. (GM) 0.8% higher to close at $33.80 on Aug 11 despite reports of 63 death claims associated with the late recall of faulty ignition switches. To assess the claims and deploy funds, General Motors has appointed Kenneth Feinberg, known for managing compensation funds for the victims of 9/11, Boston Marathon bombing and BP oil spill.

Feinberg will deal with the late recall claims registered between Aug 1 and Dec 31 this year. Till Aug 8, there were 125 claims, of which 62 were reports of injuries only. However, General Motors holds the ultimate right to accept or reject the claims.

The automaker has been facing the brunt of the delayed recall of 2.6 million vehicles with defective ignition switches, which can lead to an abrupt shutting down of the engine and prevent the deployment of front air bags in the event of a crash. The recalled vehicles mainly included Chevrolet Cobalts and Saturn Ions vehicles. However, the company issued a recall for these vehicles in Feb this year, although the problem was identified way back in 2001.

General Motors anticipates incurring a special charge of $0.4 billion for the ignition switch compensation program. However, owing to the uncertainty of the amount, the expenses can scale another $0.2 billion. Meanwhile, the Congress estimates about 100 fatalists associated with this issue.

General Motors expects to complete the compensation payments by the second quarter of 2015. Importantly, Feinberg announced that families will receive almost $1 million for death claims.

General Motors currently carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks worth considering include Tesla Motors, Inc. (TSLA), Visteon Corporation (VC) and STRATTEC Security Corporation (STRT), all of which sport a Zacks Rank #1 (Strong Buy).
 

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