24 May 2017

GM's $1.3 Billion Recall Cost Wipes Out Profit

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General Motors' recall crisis virtually wiped out its profit for the first three months of the year, as it said Thursday that the cost of repairing millions of vehicles would come to $1.3 billion.

The cost of the recall and some other accounting charges left the company with a profit of only $108 million in the quarter. 

The company recalled a total of 7 million vehicles during the quarter, most prominently 2.6 million with a faulty ignition switch tied to at least 13 deaths. GM said it would spend about $700 million to fix that ignition switch, and another $600 million on other recalls.

 While most of those repairs did not start until this month, the company booked the full cost of the recalls in the first quarter. 

Still, the nation's largest automaker will be able to afford the massive recall cost. The earnings, excluding the special charges, were better than expected by Wall Street analysts.

"It's an understatement to say the first quarter was challenging for General Motors," said GM CEO Mary Barra on a call with investors. "Nonetheless the company remained profitable and I'm very proud of the way the team has kept it's focus on the customers."  

Shares of GM are down nearly 16% so far this year, but they rose more than 2% in morning trading after the earnings report.  

Click here for the full article from CNN Money.  

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