Saturday, 26 September 2015

How Much Has the Recall Scandal Cost General Motors?

GM agreed last week to pay $900 million to settle federal criminal charges. Some say that GM got off easy. But the total cost to GM is already well into the billions, and there may be more to come.

Did General Motors (NYSE: GM) get off easy in its settlement with the U.S. government?

After the full extent of last year's recall scandal became known, many analysts thought that the U.S. Department of Justice would demand a huge settlement from GM, more than the $1.2 billion that Toyota paid last year to settle charges in the wake of its own recall mess.

But GM will pay "only" $900 million. That's despite the fact that over 100 people have died in accidents related to the defective ignition switches that are at the heart of GM's recall scandal.
How Much Has the Recall Scandal Cost General Motors?
Of course, the feds haven't said that GM is off the hook. The government has agreed to "defer" prosecution: If GM abides by a long list of strict conditions, including an independent monitor, for three years, then the government will agree not to prosecute the company for the crimes it alleges GM committed in its handling of the long-delayed recalls.

GM clearly got some credit for CEO Mary Barra's emphatic effort to cooperate with investigators and drive deep changes to GM's internal safety processes. But it's also worth noting that the recall mess has already cost GM far more than $900 million -- and there could be more costs to come.

How much more? This short slideshow adds it all up.
How Much Has the Recall Scandal Cost General Motors?
from The Motley Fool. Image sources: General Motors, U.S. Department of Justice.

It's certainly fair to argue that GM should have faced even stiffer consequences for its actions. But as you can see, GM has already spent over $4 billion as it tries to put this scandal in its rearview mirror once and for all.
CEO Mary Barra's efforts probably helped GM avoid a stiffer penalty. But the consequences of the recall mess have already cost GM several billion dollars. Image source: General Motors.
What Tim Cook Doesn̢۪t Want You To Know
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early-in-the-know investors! To be one of them, just click here.

John Rosevear owns shares of General Motors. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

No comments:

Post a Comment

Contact Form


Email *

Message *