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Big Sales Jump Signals GM is Driving Away From Recall Crisis

General Motors’ sales jumped 12.6% in May, a sign the automaker is driving away from the setback of recalling millions of vehicles.

Chevrolet Silverado pickup trucks at a dealership in Gaithersburg, Maryland. General Motors’ sales jumped 12.6% in May, a sign the automaker is driving away from the setback of recalling millions of vehicles. Reuters

General Motors has rebounded from bankruptcy and, with sales at a six-year high, the automaker appears to be accelerating away from the setback of recalling millions of vehicles this year.

New Chief Executive Officer Mary Barra is confident she will emerge from an internal inquiry into the recall issue unscathed, according to the New York Times, which said she recently told a sales meeting that the recalls were not hurting the company.

The newspaper said GM officials believe the inquiry by a former federal attorney will clear Barra of any wrongdoing in the recalls of vehicles manufactured before she became GM's first female CEO this year, but while she was a senior executive of the automaker.

The company plans to release the inquiry results Thursday morning.

GM has so far called back around 15 million vehicles this year for a variety of safety-related problems — including an ignition switch defect officially linked to 13 deaths.

Barra's confidence is borne out by the fact that rather than losing sales, General Motors posted a 12.6 percent jump in May — its best sales since August 2008, as the company began its descent toward bankruptcy.

That strong showing has taken more than a few observers by surprise considering that GM has become almost daily headline fodder in recent months for its recall crisis.

General Motors' CEO Mary Barra is confident the automaker is driving away from the setback of recalling millions of vehicles.
Mary Barra, CEO of General Motors, talks about the Chevrolet Trax at the New York International Auto Show in April. She is confident the automaker is driving away from the setback of recalling millions of vehicles. Mark Lennihan / AP

“The momentum we generated in April carried into May, with all four brands performing well in a growing economy,” GM’s VP of U.S. sales Kurt McNeil told reporters Tuesday.

But considering all the headlines, why does GM have so much momentum?

“There are literally scores of ‘scandals,’ seemingly every day,” and consumers have become “oblivious by choice” to the headlines, suggests Art Spinella, chief analyst with automotive research firm CNW Research. Despite the criticism from pundits and politicians, he contends that recalls have become “nano-second concerns,” much like so many other stories that flush through the 24-hour news cycle.

According to CNW’s Purchase Path studies, recall stories are among the least read by the general public, including those actually in the market to buy a new vehicle.

And when shoppers do consider new products, they’re likely to discover a very different General Motors from the one in the headlines, adds George Peterson, head of consulting firm AutoPacific Inc.

All of the products affected by the GM ignition switch recall — such as the Chevrolet Cobalt, Pontiac G6 and Saturn Ion — are now out of production, he points out. In fact, the automaker abandoned the Pontiac and Saturn brands when it emerged from bankruptcy in July 2009.

Recalls have become “nano-second concerns,” much like so many other stories that flush through the 24-hour news cycle.

The products now in the showrooms of GM’s four surviving U.S. brands are very different from those of the company prior to its run through Chapter 11, stresses Peterson. He noted that vehicles like the new Chevrolet Impala, Corvette and Silverado are generally garnering strongly positive reviews. The Corvette sports car and Silverado pickup, for example, were named North American Car and Truck of the Year in January. Meanwhile, the big Impala sedan has been highly touted by Consumer Reports magazine and last week was declared “superior” by the Insurance Institute for Highway Safety.

“Consumers have confidence that what General Motors is producing today is pretty darned good,” adds Peterson, “and dramatically better than anything they built in the past.”

Of course, it didn’t hurt that GM ramped up incentive spending in May by nearly 2 percent compared to April — and at an average $3,411 per vehicle, according to data compiled by TrueCar.com, it had the highest givebacks in an industry where the average incentive was a more modest $2,677. But GM’s spending on rebates and other lures was actually down nearly 7 percent from what it offered a year earlier.

TrueCar data show that the Detroit maker had the second-highest Average Transaction Prices — what shoppers actually spend after factoring in incentives and options — of all full-line manufacturers, at $35,372, it came in just behind Volkswagen.

“GM (was) able to command higher prices, while shrinking (its) incentive spend-to-price ratio,” notes TrueCar Executive Vice President Larry Dominique.

A closer look at May’s numbers show that while GM’s overall sales were up nearly 13 percent, its retail volume rose a less robust 10 percent. In fact, it saw a big burst of activity on the fleet side of the ledger, with demand spiking among corporate and daily rental buyers. The maker discounted that surge, noting it is a common factor during the spring, but it clearly helps boost GM’s momentum in May.

That said, there are simply few signs to suggest that car buyers have had second thoughts about GM’s products in the wake of one of the worst recall crises in U.S. automotive history.

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