General Motors has set aside $2.5 billion to pay for its numerous recalls. It’s a large financial hit, but one that the company’s Chief Financial Officer, Chuck Stevens, said will not impact GM’s future product plans.
Stevens told the Wall Street Journal that GM is “going to look for ways to aggressively offset” the cost of the recalls. The plan includes “[cutting] overhead, [reducing] purchasing costs and ‘[driving] complexity out of the organization.'” As such, the company’s planned new model rollouts should not be affected by financial cuts.
GM has accumulated “nearly $39 billion in liquidity as a cushion against a sales slump or some other disruption to the business” since emerging from bankruptcy, reports the WSJ. While that accumulation of wealth is saving new GM products from cost cutting, Stevens told the publication that the costly recalls were “unforeseen.”
“Even by today’s standards $2.5 billion is a lot of money,” wrote head of Munro & Associates, Inc. Sandy Munro to the WSJ. “With $2.5 billion you could create three new vehicles or rework/refresh at least seven to eight existing cars or design three or four engines.”
Comments
This is very important to continue the rebuilding of GM. Product investment is the way forward here and with out it GM will stall and slow growth like Chrysler is suffering.
The best way for GM to recover the money they are putting aside for the recall debacle is to sell cars .