Friday, March 28, 2014

GM Halts Sales of Some Cruze Models

Late Thursday, General Motors Co. (NYSE: GM) sent an email notice to all U.S. Chevrolet dealers to stop selling some 2013 and 2014 models of the company’s Cruze compact cars. The order is directed at models equipped with the 1.4-liter turbocharged engine. No recall order has been issued.

GM gave no reason for the order and there was no indication of how many cars are affected.

Karl Brauer, a senior analyst at Kelley Blue Book, offered this comment:

The timing of this stop sale order might appear unfortunate given the publicity surrounding GM’s ignition switch recall, but it actually illustrates a new approach by the automaker. Rather than waiting for a full understanding and planned fix for the Cruze, GM is apparently stopping sales at the first sign of a problem to remove the potential of endangering customers.

According to industry newspaper Automotive News, the Cruze is GM’s best-selling U.S. car, with total sales of 248,224 units in 2013. That could have a negative impact on the company’s April sales, unless GM can resolve the issue quickly. It seems reasonable to conclude that if the issue is serious enough for GM to order a halt to sales, it is very likely serious enough to warrant a recall.

There is no question that GM is spooked by the ignition switch defect that has been implicated in 11 deaths and resulted in the recall of 1.6 million cars. The company’s potential liability from the poor way they handled that issue and essentially covered it up is likely to cost it billions.

On one hand, if the company now chooses to err on the side of caution, no one can really blame it. On the other hand, the company cannot flinch every time an indicator light fails to come on. Once some details about this stop-order on the Cruze are available, we will get some idea of how the company plans to react.

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