General Motors recall to cost $1.3 bn, double the earlier estimate

The Detroit-based auto maker could be faced with its first loss since emerging from bankruptcy in 2009.

By Ananth Baliga
General Motors recall to cost $1.3 bn, double the earlier estimate
The 2004 Saturn ION Quad Coupe is one of the cars being recalled. (Credit:GM)

DETROIT, April 10 (UPI) -- General Motors has said that its faulty ignition switch-realted recall will cost $1.3 billion, double the original estimate of $750 million.

The recall includes more than six million cars and the automaker has said the costs for recall-related repairs and for 15,000 rental cars they will provide customers in the interim was higher than previously estimated. GM originally estimated the costs for the quarter to be $300 million, which was then revised to $750 million.


The auto maker could be facing its first loss since emerging from bankruptcy in 2009. The costs of the recall, $1.3 billion, will be added to a $400 million charge previously disclosed for Venezuelan currency fluctuations. GM in the first quarter of 2013 earned $1.18 billion.

GM has also expanded the ignition switch recall to include replacing the lock cylinder into which the key is inserted, because it could be pulled out with the engin still running.

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GM said it is "aware of several hundred complaints of keys coming out of ignitions. Searches of GM and government databases found one roll-away in a parking lot that resulted in a crash and one injury claim. The same searches turned up no fatalities."


The decision to add the lock cylinder to the recall was taken a day after GM Chief Executive Mary Barra testified before a Senate panel on Capitol Hill.

Dealers are said to be receiving the new ignition switches and will also replace the ignition lock cylinders and, if necessary, reprogram new keys.

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Earlier in the day, GM said that it was suspending two engineers involved with the ignition switch recall. Ray DeGiorgio and Gary Altman were cited as playing a key role in the decision to not replace the faulty ignition switch.

[Wall Street Journal] [USAToday]

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