On Feb. 10, GM announced a recall of model year 2005-2007 Chevrolet Cobalt and 2007 Pontiac G5 vehicles due to ignition switches that could inadvertently be switched off from too much weight on the key ring or jarring road conditions, factors that could cause the engine to shut off and prevent airbag deployment in the event of a crash. A series of fatalities linked to the defective ignition switch prompted GM to issue the recall and the automaker has since associated 12 fatalities to the problem.
Two weeks later, GM increased the recall to include model year 2006-2007 Chevrolet HHR and Pontiac Solstice, 2003-2007 Saturn Ion and 2007 Saturn Sky vehicles, thus bringing the total number of recalled units to roughly 1.6 million. All of the models covered in the recall have been discontinued (as have the Pontiac and Saturn brands).
GM has come under heavy fire from numerous sides because it’s been revealed that company engineers learned of the issue back in 2004, but GM elected to address the issue through dealer service bulletins rather than issue a more costly recall.
Since the recall was issued in February, however, GM has acted quickly to address the matter in a transparent and head-on fashion. Newly appointed GM CEO Mary Barra stated in a video posted on GM’s website that “something went wrong…and terrible things happened” and she has appointed a 50-person team tasked with handling consumer inquiries about the recall. In addition, she ordered a comprehensive internal safety review of known product issues, which resulted in three unrelated recalls involving an additional 1.5 million full-size vans, mid-size SUVs and the Cadillac XTS sedan.
GM said they will begin contacting customers affected by the faulty ignition switch as soon as parts are available, which they are expecting to be in early April. Until the recall has been performed, GM is urging customers to remove all items from their key rings other than the ignition key (including the key fob).
So far it doesn’t appear as if the recall has had a discernable impact on the wholesale auction prices of affected models.
Since recalled in early February, AuctionNet prices for 2005 – 2007 model year Chevy Cobalts, or the most voluminous GM model of those recalled, actually increased by a range of 4% to 14% through the week of March 10 (on a two week moving average basis). In fact, movement has been directionally in line with the seasonally-induced 7% rise in prices observed for all 2007 model year compact cars (note that the low starting price associated with older vehicles leads to more pronounced changes in percent terms).
Price movement for other recalled models – Chevy HHR, Pontiac G5, Saturn ION, etc. – has been more-or-less directionally similar to what’s been recorded on the Cobalt (meaning, there’s been no evident drop-off; prices have either been flat or up).
Going forward, it wouldn’t be surprising to see prices of affected models shift downward in reaction to the recall, especially if the intense media spotlight on the subject persists for an extended period of time.
Used Toyota prices clearly suffered when the brand went through a similarly publicized, but much larger in scale, unintended acceleration recall of nearly 11 million vehicles worldwide back in 2009 and 2010. The automaker issued a series of recalls related to the matter, but the largest didn’t occur until late January 2010 and it took approximately three weeks to notice an emphatic change in used Toyota prices.
We should know in relatively short order if the prices of affected GM models will suffer as a result of the recall. Dealers with recalled models currently in inventory will certainly ensure that repairs are made as quickly as possible. Consumers driving affected models should do the same and retain documentation as proof that repairs were made; this will help allay consumer fears – and preserve value – when it comes time to sell down the road.
We’ll continue to monitor prices over the next few weeks and provide updates on what impact (if any) the recall has had.