GM slapped with $10 billion lawsuit, but also J.D. Power honors (+video)(Read article summary)
General Motors faced another massive recall, a congressional grilling, and a multibillion dollar lawsuit this week. But the automaker's sales continue to be strong, and newer GM drivers are among the most satisfied in the country, according to a recent J.D. Power and Associates survey.
General Motors has faced a world of serious problems over the past few months, but you wouldn’t know it from looking at current company performance. Sales are up. Accolades for its vehicles are rolling in. Its stock price has been steady since May.
But it still hasn't fully paid for past mistakes.
The automaker continues to deal with the fallout from the ignition-switch defect that led to at least 13 deaths and a recall of at least 2.6 million older compact cars. (Additionally, the automaker recalled 3.4 million larger vehicles this week for a similar issue). As chief executive Mary Barra was on Capitol Hill Wednesday facing tough questions about GM’s actions leading up to the recall, attorneys in California filed a $10 billion lawsuit against the automaker.
The suit, filed by the law firm Hagens Berman Sobol Shapiro, claims that the ignition-switch scandal hurt the resale value of millions of GM vehicles by between $500 and $2,600.
“GM’s egregious and widely publicized conduct and the never-ending and piecemeal nature of GM’s recalls has so tarnished the affected vehicles that no reasonable consumer would have paid the price they did when the GM brand meant safety and success,” the filing read.
The suit seeks to compensate customers who bought or leased a GM vehicle between the company’s 2009 bankruptcy and April 1, 2014. It’s the first lawsuit seeking damages for GM owners whose vehicles weren’t a part of the switch recall.
More civil litigation will likely follow, which makes it difficult to judge the ultimate impact of the scandals on the company's bottom line.
The federal government’s investigation into the company’s actions continues, and the 20 million (and counting) GM vehicles recalled in the US this year have cost the automaker $2 billion so far and only look to become even more expensive in the form of potential government fines, repair costs, and lawsuit settlements. The company's stock, which has steadied since the initial revelations of the ignition-switch problems this spring, is down 13 percent from its 2014 peak.
In the meantime, however, the company is performing surprisingly well, all things considered. GM was one of the top performing automakers this year in J.D. Power and Associates’ annual Initial Quality Survey, which surveys 86,000 drivers about their first 90 days with a new vehicle. Six GM vehicles received top marks in their category, more than any other brand. The company’s trucks, crossovers, and full-size SUVs performed particularly well. Perhaps even more surprising, the survey was conducted between February and March of this year – during the height of the ignition switch scandal.
So far, the automaker’s sales haven’t been affected, either. GM sales increased 12.6 percent in May, giving the company its best month since August 2014.