Do consumers really separate the “old General Motors,” the struggling company that existed before its 2009 bankruptcy and federal bailout, from the new GM?
Apparently so, according to figures released Tuesday.
Sales of GM vehicles soared last month, offering fresh evidence that so far the scandal over the automaker’s slow recall of older cars with a deadly ignition-switch flaw is having little impact on the popularity of its new vehicles.
The company reported that its U.S. sales in May were up 13 percent over a year ago, marking the company’s best month in nearly six years. It said business was up across all four of its brands — GMC, Chevrolet, Buick and Cadillac.
“The momentum we generated in April carried into May, with all four brands performing well in a growing economy and 17 vehicle lines posting double-digit retail sales increases or better,” Kurt McNeil, U.S. vice president of sales operations for GM, said in a statement.
Chrysler and Ford also had stellar sales in May, posting increases of 16.7 and 3 percent, respectively.
Marketing professionals said GM has been able to increase sales even while being hammered by bad news over the ignition-switch flaw linked to 13 deaths. That, they said, is largely because the vehicles involved in the recall are no longer made by the company.
That has allowed management to lay the problems linked to the recall on the “old GM” — the company that existed before the automaker’s bankruptcy and federal bailout enabled it to emerge with more working capital and a streamlined and much improved product line.
“You see that a lot of cars people are buying today are unrelated to the small cars involved in the recall,” said Greg Smith, chief creative officer of the VIA Agency, a Portland, Maine, marketing firm that focuses on middle-class consumer brands. “GM’s cars are getting incredible reviews. I think the narrative is that the problems are things that happened before the sea change in Detroit.”
The company’s sales increases were led by a 40.5 percent increase for the Chevrolet Cruze compact and a 23.1 percent increase for the redesigned Chevrolet Impala.
GM’s strong sales month came after sales increases in March and April, boosting the company’s hopes that the ignition-switch recall will not do lasting damage to the automaker.
GM is still facing a series of government investigations and a slew of private lawsuits in connection with the botched recall. An internal report into the problem is due out in the coming days.
Meanwhile, GM chief executive Mary T. Barra is likely to be summoned back to Congress for a second round of hearings to explain why the company did not recall the vehicles until a decade after first learning that the ignition switch on Chevrolet Cobalts and other small vehicles was defective, allowing cars to be inadvertently turned off, making steering and braking more difficult and disabling air bags.
In February, the company ordered the first of a series of recalls that affected 2.6 million Cobalts and other small cars. The problem and the scrutiny that has accompanied it prompted the automaker to overhaul its internal processes, resulting in a cascade of recalls. This year, the company has ordered 30 recalls covering more than 16 million vehicles, by far the most in its history. GM has set aside $1.7 billion to pay for the repairs. Expected fines and settlements from lawsuits are likely to take the financial toll on the company much higher.
Jeff Schuster, an analyst with LMC Automotive, said consumers may perceive the spate of recalls — which, to a far lesser degree, has also involved other automakers — as the company openly trying to correct its problems.
“This feels like the opposite of what you might expect,” Schuster said. “It is almost as if the industry and GM, in particular, has taken responsibility for the situation. I think there is a feeling out there that they are being responsible, doing the right thing and trying to fix the situation.”