GM's Total Bill For 2014 Recalls Is $4.1 Billion: What About 2015?

February 5, 2015

2014 may go down in history as the Year of the Recall. Every time you refreshed your favorite news feed, it seemed like another automaker was asking owners to bring in vehicles for service.

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But among all the car companies doing business in the U.S., none had as many recalls last year as General Motors. The unpleasantness began in February, as GM recalled roughly 780,000 older models for faulty ignition switches. That one recall snowballed, affecting many, many more vehicles, resulting in numerous hearings on Capitol Hill and a compensation fund for victims. When corks began popping on New Year's Eve, the company had recalled more than 30.4 million vehicles for 2014 -- nearly 27 million of which were registered in the U.S.

How much did all that cost the Detroit automaker? According to CNN, the bill came to $4.1 billion, including repair costs, compensation to victims, and associated expenses.

By far, the biggest chunk of that sum -- roughly $2.8 billion -- was spent repairing vehicles. Another $874 million was earmarked for future repairs of vehicles recalled in 2014, and GM estimates that $400 million will be spent on the ignition-switch compensation fund. (That last figure is at the low end of early estimates, which projected spending could go as high as $600 million.)

Ordinarily, you'd expect that to take a big bite out of GM's profits -- and it did -- but very strong sales helped the company stay in the black. Even though most of the costs associated with recalls were logged in the first half of the year, GM still managed to break even for the first six months. In the latter half of the year, as sales continued to soar, GM actually came out ahead.

For the year as a whole, the company's $155 billion in revenue was whittled away to an operating profit of $6.5 million -- not great, but still in positive territory. That's due to 9.9 million vehicle sales worldwide, a two percent growth over the records set in 2013.

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It would be tempting to say that GM's darkest days are behind it, and that the company will soon be rolling in mountains of dough. But 2014 may have been a turning point as far as recalls are concerned. Much of the uptick in recalls at GM -- and elsewhere -- is likely due to heightened sensitivity about safety problems, both among automakers and the general public. That sensitivity will no doubt fade over time, but it's probably left some kind of lasting impression.

Will the awareness and concern continue into 2015? Could things get worse? Could automakers wind up shelling out even more for repairs, awareness campaigns, and the like? Share your thoughts in the comments below.


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