General Motors (GM) Shares Tumble on Federal Probe of Recall

Shares of Detroit, Michigan, based General Motors Company (GM) fell on Tuesday, losing $1.91 per share, or 5.15%, to $35.18, on volume of just over 41 million shares, on a down day on Wall Street across the board. Bloomberg reported that the Justice Department has opened a criminal investigation of the company in regard to deadly ignition switches installed in certain compact cars between 2003 and 2007. Congress is also launching a probe into the matter, which has been linked to the deaths of 13 people involved in 31 crashes.

GM is the largest automobile manufacturer in the US, and the second largest in the world after Toyota (TM), selling nearly 9.3 million vehicles worldwide in 2012. The company produces cars in 37 countries, and does business in 157. GM had $3.8 billion in profits in 2013 on total revenue of $155.4 billion. The company employs about 219,000 people. The Justice Department opened the investigation to determine if GM broke any laws in the recall of the faulty ignition switches. The case is being handled by the US Attorney's Office in New York. The issue is the fact that GM failed to recall the vehicles despite admitting knowledge of the defect for at least a decade. The recall affects 1.6 million compact cars manufactured in model years from 2003 to 2007. Subcommittees in both the House and Senate have begun probes to determine why the National Highway Traffic Safety Administration (NHTSA) failed to take action either. The NHTSA is the government's road safety watchdog agency. The defective ignition switches cause car engines to suddenly shut down, resulting in the loss of both power assisted steering and brakes, and interference with safety air bag inflation during crashes. The shut down - which can be caused by heavy key chains - causes drivers to lose control of their vehicles and risk serious accidents. The investigation of GM by the Justice Department has not been made public. GM officials have not commented on the investigation or the Congressional probes, but it has hired an attorney to investigate the company's actions leading up to the recall. The company has pledged full cooperation in the investigation and the probes. GM CEO Mary Barra indicated that an internal review has been launched by the company that will "give us an unvarnished report on what happened; we will hold ourselves accountable." Conversely, the NHTSA has indicated that the rate of failure to the ignition switches was not significantly worse on GM cars than it is for vehicles manufactured by other car manufacturers. The NHTSA could fine GM up to $35 million for a delayed response to requests for detailed information regarding when GM knew about the problems with the ignition switches. But the criminal investigation, in combination with Congressional hearings, could hurt the company's public image at a time when it's trying to remarket its image as a manufacturer of quality cars. Other News General Motors Company GM Maintaining Pricing 'Discipline' Amid Sales Slump GM is maintaining pricing discipline on its higher end models. GM Sales Up 19.9% in China GM announced a 19.9% year-over-year increase in sales in China. Other Stocks in the News McDonald's may soon be more like Chipotle The fast-food giant is increasingly letting customers customize their meals. Macy's Stock Can Continue to March Higher Wells Fargo upgraded shares to Outperform from Market Perform. Copyright 2014 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Mar 12, 2014
By Kevin Mercadante

Copyrighted 2020. Content published with author's permission.

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