Yahoo Finance At Chevy, some sharp cars fall victim to a recall controversy
General Motors (GM) CEO Mary Barra has the unenviable challenge of explaining why a safety recall involving 2.6 million vehicles and at least 13 deaths took more than a decade to get underway. Her subordinates have a different but equally important job: To keep moving the metal.
Related: Mary Barra’s strong leadership will lead GM beyond recall drama
GM’s sales have held up so far this year despite the worsening controversy over the safety recall, but that may be about to change. Data from research firm YouGov BrandIndex shows that GM’s reputation has deteriorated steadily during the last two months, as the recall has expanded and Congressional investigators have begun to scrutinize it. The same goes for Chevrolet, GM’s biggest division, which has also suffered a sharp drop in the “buzz score” BrandIndex calculates, wich is based on consumer polling. More people now say they have a negative image of Chevy than a positive image.
Some of the recalled vehicles were sold by Pontiac and Saturn, two brands GM has since retired. But many were Chevy Cobalts, which presents a tough problem for a division that seemed to get back on track in 2013 after struggling for several years. Chevy discontinued the Cobalt in 2010, but many consumers may not make the distinction between Chevy then and Chevy now.
“We’re obviously monitoring the situation,” Tim Mahoney, chief marketing officer for Chevy, tells me in the video above. “It runs in peaks and valleys, depending on news of the day.”
This ought to be a barnstormer year for Chevy. The new Corvette Stingray is beloved by critics and selling fast. The Impala large sedan that debuted last year is another hit. Chevy has competitive vehicles in most other segments and recently introduced the Trax, a small crossover aimed at budget buyers, especially in urban markets.
“Funamentally, we’re focusing on new product that’s coming on stream,” says Mahoney. “We’ve got great product coming.”
There’s probably not much else Chevy can do at the moment except wait for the controversy to run its course. That may take a while. GM is hoping to avoid any additional liability for crashes in recalled vehicles that occurred before its 2009 bankruptcy filing, which will probably provoke a series of court battles that keeps the bad publicity going. That type of liability shield is typical in bankruptcy cases, but since GM survived thanks to a taxpayer bailout, hiding behind legal technicalities may appear unseemly, worsening the company’s PR problem.
By mid-summer, GM may be poised to recover from the controversy. By then, victim-compensation expert Ken Feinberg, whom GM has hired, should have submitted a plan to provide relief for harmed customers. A third-party review of the whole matter should be completed and published, and federal investigations should be fairly well along, if not complete. The government may still file criminal charges, which could take years to resolve, but by then the daily drip of bad news ought to have slowed.
In June, J.D. Power will release its annual quality rankings, an important benchmark for most automakers. Last year, Chevy ranked 5th out of 33 brands, its best showing ever. It ought to score highly this year as well. Chevy would much rather talk about that than a flawed vehicle built a decade ago.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.
