Consumers could pay costs of constant recalls, Marchionne says

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WASHINGTON -- The costs of handling vehicle recalls may soon be passed to consumers if the volume and pace of recalls following General Motors' ignition switch crisis become the norm, Fiat Chrysler Automobiles CEO Sergio Marchionne said.

Collectively, recalls already cost the industry billions of dollars annually, and this year looks to be one of the most expensive yet. GM's recalls, including the 2.6 million vehicles with defective ignition switches linked to at least 13 deaths, led to a $1.3 billion charge to GM's first quarter earnings, and GM expects another $400 million recall-related charge in the second quarter.

GM issued recalls this week covering more than 2.6 million U.S. vehicles, bringing its total recall count to 29 covering some 13.8 million U.S. vehicles so far this year.

“If effectively this frequency of recalls becomes a norm, if everybody starts doing this, then I think you will see this cost being shifted to the consumer,” Marchionne told reporters after a panel discussion today at the Brookings Institution here. “It will transfer itself over onto the selling price of the vehicle.”

Marchionne said automakers will become more prudent in how they handle vehicle defects. “We’re beginning to see it in our shop,” he said. “People are getting truly, truly cautious.”

Chrysler has begun a review of its recall processes with the help of outside consultants to find areas of improvement, Marchionne said.

“To the best of my knowledge, the vehicle recall committee that’s in place and all the work that’s done by the technical staff is world-class. If we can improve it, we will,” he said. “We have taken this seriously; we continue to take it seriously. It’s nothing to be swept under the carpet. It’s not something that’s going to go away in two months.”

The U.S. Department of Transportation hit GM with a $35 million fine, the maximum allowable, for delaying the recall of Chevrolet Cobalts, Saturn Ions and other vehicles with defective ignition switches. Marchionne said the prospect of such fines will have little impact on how automakers handle recalls.

“I think the issue is a reputational issue associated with a brand. It has to do with what we do as professionals,” he said. “The issue is much bigger than the fine.”

You can reach Ryan Beene at rbeene@crain.com. -- Follow Ryan on Twitter

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