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April 16, 2014

GM sales eyed for impact of ignition switch recall

DETROIT — As General Motors executives show off their newest cars and trucks in New York this week, analysts are watching for signs that consumers are shying away from the ones sitting on dealer lots.

Many expect GM sales to take a hit from a mishandled recall of small cars, though it’s unclear when and how severe. Any decline would hurt the automaker’s market share and potentially its credit rating. Concerned investors have sent GM stock to a 10-month low.

Data collected from dealers by J.D. Power and Associates show GM U.S. sales fell 6.3 percent in the first five days of April compared with a year ago, while the overall market dropped just 0.3 percent. The same data show an even larger decline for Ford Motor Co. April is expected to be a rebound month in the U.S. after a rough winter, and analysts expect sales to pick up in the month’s second half.

GM began recalling 2.6 million small cars worldwide in February to replace faulty ignition switches. The company says at least 13 deaths have been linked to the switch problem. CEO Mary Barra’s appearance before Congress this month drew even more attention to the issue.

Historically, big, highly publicized safety problems eventually affect sales, said Jesse Toprak, chief analyst for the car-buying site Cars.com. GM’s sales weren’t hurt in February or March, but data from April is starting to show weakness, Toprak said.

He said buyers trying to decide between a GM brand car and a rival “might just take GM from their consideration list, thinking that it’s not worth it.”  

Jeff Schuster, senior vice president of sales forecasting for LMC Automotive, an industry consulting firm, expects GM sales to show a gain this month, but only about half the 8 percent increase he forecasts for the industry overall.

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