Recalls don't dent General Motors' sales figures

GM announced 13 separate recalls in May, but that was a mere footnote for consumers.

At least in theory, the past four months should have been trying ones for General Motors.

The company admitted it knew key details about a deadly defect in its cars for more than a decade, and that flaw was responsible for killing at least 13 motorists and probably more. In the ensuing fallout, the company has issued more than two dozen recalls that affect 15.8 million cars in North America.

Those recalls have dented profits, but they haven't dampened America's enthusiasm for GM-made vehicles.

Consumers either haven't noticed or haven't cared about the avalanche of safety hazards associated with GM's cars. Sales at the Detroit-based automaker have increased three percent in 2014, and as details of the crisis have steadily emerged, they've only gotten stronger.

In May, GM enjoyed its best month of sales since August 2008, the month before the start of the economic downturn in the United States. The company sold 284,694 vehicles, according to our latest By The Numbers report, a 12.6-percent improvement over May 2013.
GM announced 13 separate recalls in May, but that was a mere footnote for consumers.

It's the second consecutive month of sales momentum in the face of ongoing recalls for GM.

"I think they're doing a really good job handing a really bad situation," said Greg Smith, chief creative officer at The VIA Agency, an advertising agency that manages brand reputations. "They've created this internal safety review board, which sounds good, at least on paper, and I think that's another reason why people are willing to believe that this is a new GM. They're behaving like a contemporary company and not trying to obfuscate."

It's the second consecutive month of sales momentum in the face of ongoing recalls for GM. The company issued six recalls in April, and CEO Mary Barra was called to testify before two Congressional committees. Yet overall sales increased 6.9 percent in April.

Smith said one component of General Motors' success in weathering the crisis is that while company executives have caught the brunt of the criticism, the brands – Buick, Cadillac, Chevrolet and GMC – have gone relatively unscathed.

"Consumers aren't buying GM," he said. "They're buying the Impala or GMC trucks, and those products have gotten very good reviews at a variety of places. The consumer is going out there and seeing value in that."

It helps that the Cobalt, like other cars at the center of the ignition-switch recall, is no longer for sale.

Chevrolet, with its brand-name Cobalt at the heart of the ignition-switch crisis, has been particularly resistant to sales problems. Sales are up across all of GM's brands in May, but Chevrolet showed the most robust growth, with a 14-percent year-over-year gain.

It helps Chevrolet that the Cobalt, like other cars at the center of the ignition-switch recall, is no longer for sale. Still, some experts are surprised at both the growth of auto-industry sales in general and GM sales in particular as consumer confidence in the US plateaued over the past two months.

"Auto sales for the month of May seemed almost to defy logic," said Jack R. Nerad, senior analyst for Kelley Blue Book. "... General Motors' sales results epitomized that trend of defying logic."

Demand surged by 11.4 percent across the industry, year over year, and industry experts project that automakers could sell as many as 16.7 million new vehicles in North America this year, which would be the most in six years. Ford, which had its own recall of 1.4 million cars in late May, saw no diminished enthusiasm for sales. On the contrary, it enjoyed its best month of May sales in a decade.

Used-car prices for GM models have shown no significant fluctuations or discernible trends in recent months.

Paul Nadjarian, CEO and founder of MojoMotors.com, said his website has culled more than 35,000 leads to auto dealers over the past two years, and only two of those customers had inquired about recalls.

That applies to both new and used cars. Even as General Motors has sought to draw a line between the "old" pre-bankruptcy company that focused on sales volume and the "new" GM that is more responsive to potential safety hazards, used-car buyers are paying little mind to the potential pitfalls in GM vehicles.

Nadjarian said used-car prices for GM models have shown no significant fluctuations or discernible trends in recent months. The average price on a 2010 Cobalt LT has dropped by about $100 since February, according to MojoMotors data. On the other hand, the price of a 2012 Chevy Malibu, a recently recalled model, is up nearly five percent.

"The bottom line is consumers like the new GM products and big, aggressive sales incentives," Nadjarian said. "Recalls are just not a hot topic for the average consumer."