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Can GM find road to recovery after recall?
General Motors is having to recall around one and a half million cars, because the vehicles may suddenly lose power steering.
Can a company come back from this kind of product disaster? The answer is yes if you look at Toyota which famously had to recall models after an accelerator fault was identified. Toyota Motor Corp. has been forced to pay $1.2 Billion to the US government after being accused of failing to respond quickly enough to the fault. The US Attorney General says the firm initially delayed a wider recall when the problem was first diagnosed.
Toyota has already settled a class action suit, other legal action remains outstanding. Yet the firm’s share price is up 23.3% over the year.
US prosecutors have now launched a claim against GM after the ignition fault behind the recall was linked to 13 deaths.
Saxo Bank’s Head of Equity Strategy Peter Garnry remains positive about GM, within the broader context of the US car market: “Annual US car sales are currently around 15.3 million, corresponding to around 4.8 percent of the current population of 316.4 million. This ratio is the lowest level since 1992 and has historically been closer to around 5.7 during economic expansions. If annual car sales bounce back to the average they would be closer to 18 million, indicating an upside of around 16 percent from current levels”.
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