April 17, 2014 6:01 p.m. ET
General Motors Co. GM +0.03% General Motors Co. U.S.: NYSE $33.98 +0.01 +0.03% April 17, 2014 4:00 pm Volume (Delayed 15m) : 12.11M AFTER HOURS $34.00 +0.02 +0.06% April 17, 2014 6:08 pm Volume (Delayed 15m): 245,787 P/E Ratio 8.72 Market Cap $54.01 Billion Dividend Yield 3.53% Rev. per Employee $709,712 More quote details and news » is spending about $1 million a day providing loaner cars and insurance, according to cost data provided by dealers, to 30,000 U.S. customers awaiting replacement parts for their recalled vehicles.
Initial production of ignition-switches and cylinder locks suggest the recall could drag on into the fall. GM has said it expects to have by August 31 about 1 million components, enough to repair about 43% of the 2.3 million U.S. Chevrolet Cobalts, Saturn Ions and other models impacted by the recall.
GM is replacing the parts after determining ignition switches can slip out of the "on" position, stalling the engine and cutting power to steering, brakes and air bags. Thirteen deaths have been linked to the defective ignition switches.
On Thursday, a federal judge ruled against a request that GM order customers to park their vehicles while awaiting the ignition-switch replacements. That order likely would have driven up the company's costs.
A spokesman for the Detroit auto maker declined to comment on the daily cost of the loaners. The cars and other repair costs are covered by the $1.3 billion charge to earnings the company is taking in its fiscal first quarter. It is expected to disclose results for the period on April 24.
Delphi Automotive DLPH +1.97% Delphi Automotive PLC U.S.: NYSE $67.20 +1.30 +1.97% April 17, 2014 4:01 pm Volume (Delayed 15m) : 1.80M AFTER HOURS $65.90 -1.30 -1.93% April 17, 2014 4:59 pm Volume (Delayed 15m): 1,021 P/E Ratio 17.19 Market Cap $20.19 Billion Dividend Yield 1.49% Rev. per Employee $140,709 04/16/14 GM to Ask Court to Bar Recall ... 04/15/14 GM Chief Can't Shake Recall Fu... 04/11/14 GM CEO Informed of Government ... More quote details and news » PLC, which supplied the defective ignition-switches and is building the replacements, declined to comment on whether it has been approached about paying for some of GM's costs. GM also declined to say whether it has sought any reimbursement from Delphi.
Wall Street analysts say the existing charge should be enough to cover the parts, labor and rental cars expenses of existing recalls, assuming no problems with parts deliveries. "I don't expect the number to move much unless there is another recall. And even then, it has to be significant," said David Whiston, an analyst with Morningstar Inc. MORN +0.96% Morningstar Inc. U.S.: Nasdaq $75.44 +0.72 +0.96% April 17, 2014 4:00 pm Volume (Delayed 15m) : 124,596 AFTER HOURS $74.72 -0.72 -0.95% April 17, 2014 4:59 pm Volume (Delayed 15m): 1,511 P/E Ratio 28.25 Market Cap $3.34 Billion Dividend Yield 0.90% Rev. per Employee $195,867 More quote details and news » Brian Johnson, a Barclays BARC.LN +3.77% Barclays PLC U.K.: London GBp246.50 +8.95 +3.77% April 17, 2014 4:35 pm Volume : 81.98M P/E Ratio 49.40 Market Cap GBp38.94 Billion Dividend Yield 5.68% Rev. per Employee GBp262,765 04/17/14 GM Recall Costs Pile Up 04/17/14 Changes Afoot As Barclays Seek... 04/16/14 French Prime Minister Manuel V... More quote details and news » analyst, estimates GM could take another $1.5 billion charge in the fourth-quarter to cover victims and "economic loss" litigation, and have another $1 billion charge in 2015 to pay federal fines.
GM last month promised to provide loaner cars to customers covered in the recall at no expenses when asked. Dealers are providing vehicles mostly from their fleets and are being reimbursed by GM for between $30 and $38 a car a day, according to a half-dozen dealers interviewed.
The auto maker is counting on its dealers help pull off a flawless execution of the massive repair job, hoping to rebuild trust with owners and mend its recall-battered reputation. A decadelong failure to recall the compact cars has made GM the subject of congressional hearings and a Justice Department criminal investigation.
GM and some dealers say customers appear to be taking the news in stride and sales haven't been hurt. On Thursday, the auto maker said its first quarter sales rose 2% to 2.42 million vehicles world-wide. "We don't really have people who are upset," said Jerry Seiner, a Chevrolet dealer in Salt Lake City. "What I worry about some times are the people we don't hear from."
In some instances, dealers say they have had so many requests for loaner cars that they ran out or had trouble finding rentals. "The calls of people requesting a loaner have dwindled," said Steve Cook, owner of Cook Chevrolet Buick in Vassar, Mich. "But at times, it can overwhelm my service writer."
Two retailers interviewed at the New York International Auto Show said the fixes and confusion over when repairs can be made are tying up staff and taking their focus off new car sales.
"They need to communicate better with us," one dealer said who asked not to be named. "Some of those executives need to get out of Detroit and get into the dealerships."
However, GM North America chief Alan Batey, speaking at the same auto show, said the company's 7% March retail sales increase shows GM dealers are still selling new vehicles at a good pace. "I met with 100 dealers who were in Detroit earlier this week for our Dealer of The Year awards and they were passionate and believe what we are doing," he said. "We only shipped parts on Monday so we are still in the early days. We are in this as one team," he said.
Chevrolet global marketing chief Tim Mahoney said he thinks it is unlikely GM will resort putting Chief Executive Mary Barra in a commercial to apologize. He said her continued blogs, email and corporate videos are doing the job and offer an element of authenticity that might be lost in a 30-second commercial spot.
Barry Gonis, general manager of Chevrolet Lordstown, in Lordstown, Ohio, said his dealership received its first parts on Monday and started making fixes this week. The repair takes about 45 minutes to complete, he said.
"It is going real smooth," Mr. Gonis said. "I haven't had any problems with customers at all. Some people didn't even care to have a rental car." Bill Fox, a partner in Fox Dealerships in Auburn, N.Y., said GM will provide dealers with a list of recall-affected owners in his area, using state registration data. His dealership intends to reach out to every single one of them. Mr. Fox admits it will be a challenge, trying to track all of them down.
—Jeff Bennett
contributed to this article.
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