Just about everyone can agree that General Motors (GM) hasn't had a good 2014 – at least as far as public relations is concerned. But the massive recalls that have proved costly and embarrassing to the iconic carmaker haven't put a dent in sales. Consumers continue to flock to GM showrooms to buy cars and trucks.
GM has recalled nearly 29 million cars since January, costing the company more than $2.5 billions. But it's selling plenty of vehicles to help make up for that lost revenue.
Sales up 1%
The company recently reported its June 2014 sales rose 1% over June 2013, giving it the best June since 2007. But the recalls do appear to be having an impact in one little-noticed metric.
The automotive search engine ISeeCars.comconducted an analysis of sales of GM used cars, looking specifically at the models included in the recall for the faulty ignition switch. It says it found these cars suddenly became bargains, with price cuts more than double the average of all similar models.
The company looked at the 6 GM cars affected by the ignition switch recall and found that the average price of all the recalled vehicles dropped by 14% from March through June 2014, compared to March through June 2013 and adjusted for inflation.
By comparison the average for all similar cars was 6.7% over the same time period.
"We surmise that the recalls are playing a role in motivating sellers to sell their used cars and at a lower price point that they otherwise would," says Phong Ly, iSeeCars.com CEO.
While the GM recalled cars dropped by 14 percent on average over the March-June 2014 time frame, the decline got steeper every month, hitting 15.5% in June.
Among the models included in the recall, the Chevrolet HHR, Saturn Sky and Pontiac Solstice dropped by smaller amounts than the Chevrolet Cobalt, Pontiac G5 and Saturn Ion.
Some held their value better
"The HHR, as well as sibling convertibles Sky and Solstice are definitely more unique than the other cars in the recall. Their unique designs likely contributed to their desirability and helped them hold their value a bit better," Ly said.
When measured against the average of all similar models, the average price decline for the Chevy Cobalt, Pontiac G5 and the Saturn Ion was at least two times greater. Used car buyers were able to purchase a 2005-2007 Cobalt for 13.7% less than similar models, a decline matched by the 2007 G5. The 2003-2007 Ion was 13.6% cheaper.
Supply and demand?
Maybe it was a supply and demand function. Maybe owners of the recalled models decided to dump their cars on the used car market.
The opposite appears to be the case. iSeeCars.com says its analysis shows that, while used car sales in general rose in the springtime months, the number of GM cars in the inventory fell by about 1%. It speculates GM owners were actually reluctant to try to sell their cars in this environment.
And GM, itself, does not appear to be tainted by the recalls. The price analysis says the average price of a GM car not included in the recall was down only 7%, nearly in line with the average of all used cars.
Worse than he thought
Meanwhile, former GM Chairman and CEO Dan Akerson has weighed in on the automaker's ongoing recalls, sparked by the delayed ignition switch recall that led to 13 deaths.
In an exclusive interview with the Detroit News, Akerson said the recall crisis shows GM had corporate culture problems deeper and more serious than anyone realized. Some executives in the company knew about the ignition switch problems a decade before the cars were finally recalled.