The massive GM recall just got more expensive

Apr 11, 2014

General Motors Thursday revised up to $1.3 billion dollars its estimate of the cost of recalling millions of cars with faulty ignition switches.

The automaker will now replace the ignition lock cylinder as well as the switch itself on the defective vehicles. The $1.3  billion estimate includes the cost of repairs and of providing loaner vehicles to customers.

GM shares fell to a 10-month low today in the wake of the news. Ratings agency Standard & Poor's said Thursday that it might put off a planned upgrade of GM's debt to investment-grade status until next year.

But Dave Sullivan, an analyst at the research firm AutoPacific, expects the company to bounce back. "Financially ... this is definitely something that is going to hurt, but long term, I don't really see it being an issue or crippling the company or anything like that."

GM has recalled 2.6 million cars this year to repair faulty ignition switches that have caused some drivers' keys to fall out of the ignition while the vehicle is on. The switches have been linked to at least 13 deaths since 2005, and many lawmakers say the company should have done more to fix the problem sooner.

GM CEO Mary Barra has led the company's response to the recall crisis.
GM CEO Mary Barra has led the company's response to the recall crisis.