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GM recalls 1.5 million more vehicles; CEO says 'terrible things happened'

The General Motors logo is seen outside its headquarters at the Renaissance Center in Detroit, Michigan in this file photograph taken August
The General Motors logo is seen outside its headquarters at the Renaissance Center in Detroit, Michigan in this file photograph taken August

By Ben Klayman

DETROIT (Reuters) - General Motors Co announced new recalls of 1.5 million vehicles on Monday and in a virtually unprecedented public admission by a GM chief executive, Mary Barra acknowledged the company fell short in catching faulty ignition switches linked to 12 deaths.

"Something went wrong with our process in this instance, and terrible things happened," she told employees in a video message posted online. Barra said the company is changing how it handles defect investigations and recalls.

In the last two months, GM has recalled more than 3.1 million vehicles in the United States and other markets. The actions started with last month's recall of more than 1.6 million vehicles for faulty ignition switches. The latest recalls cover airbag wiring harnesses, brake parts and other components across several models.

The Detroit automaker said on Monday it would take a $300 million charge in the first quarter, primarily to cover the costs related to the ignition-switch recall and the three new recalls.

Barra previously apologized for GM's failure to catch the faulty ignition switches sooner. In Monday's video, she said GM is "conducting an intense review of our internal processes and will have more developments to announce as we move forward."

The decade-long process that led to last month's ignition-switch recall of such older GM models as the 2005-2007 Chevrolet Cobalt and 2003-2007 Saturn Ion has led to government criminal and civil investigations, congressional hearings and class-action lawsuits in the United States and Canada. All ask why GM took so long to address a problem it has said first came to its attention in 2001.

Barra said on Monday that the company was working with the supplier of the ignition switches, Delphi Automotive, to add a second production line for replacement parts and that customers would receive a detailed notice by mail during the second week of April.

The latest recalls cover more than 1.5 million newer crossover utility vehicles, luxury sedans and full-size vans. While there were reports of engine compartment fires in two dealer-owned Cadillac XTS sedans, the company said it has received no reports of accidents or injuries related to the three new recalls.

GM said the latest recalls include 1.18 million mid-sized crossovers to repair an issue that could lead to the nondeployment of side airbags. It said it will repair the wiring harness of seat-mounted side airbags.

Affected are some 2008-2009 and all 2010-2013 Buick Enclave and GMC Acadia crossovers, some 2009 and all 2010-2013 Chevrolet Traverses and some 2008-2009 and all 2010 Saturn Outlooks. Most of the vehicles were sold in the United States, but some are in Canada and Mexico.

The automaker also is recalling 303,000 Chevrolet Express and GMC Savana full-size vans to replace plastic material in the passenger instrument panel to meet federal head-impact crash standards for unbelted passengers, a spokesman said.

Affected are vans from model years 2009 through 2014 that are rated to carry up to 10,000 pounds including the vehicle's own weight, the spokesman said. Most were sold in the United States, but also in Canada, Mexico and other markets.

In the XTS, a brake booster pump wiring issue can lead to overheating, melting of plastic parts and a possible engine compartment fire, the spokesman said. There were two reports of fires in unsold cars on dealer lots in June and September last year as well as two cases of melted components.

Affected are 63,900 of the 2013 and 2014 luxury sedans, mostly in the United States, but also in Canada, Mexico and a small number in the Middle East, the spokesman said.

CLASS ACTION

GM said the new recalls resulted from Barra's push for a comprehensive internal safety review following the ignition-switch recall.

"I asked our team to redouble our efforts on our pending product reviews, bring them forward and resolve them quickly," Barra said in a statement on Monday.

On Friday, the automaker was hit with what appeared to be the first U.S. class action related to the ignition-switch recall, as customers claimed their vehicles lost value because of the ignition switch problems. The proposed class action was filed in a Texas federal court. Other plaintiffs' lawyers say they are preparing to file similar cases in the coming days.

GM shares closed 1.6 percent higher at $34.63 on Monday on the New York Stock Exchange. Last week, the shares fell 10 percent.

Analysts have called the media coverage of the ignition-switch recall and resulting sell-off of GM stock "overdone."

"We think much is being made in the media about recent recall headlines, but in short, we believe GM is doing a good job balancing its ongoing investigation while taking steps to prevent further vehicle related incidents by proactively announcing new vehicle recalls," Stifel analyst James Albertine said in a research note on Monday.

"There is clearly a target on GM's back, in our view, given its highly publicized government-sponsored bailout and its industry-leading market share position."

Barclays analyst Brian Johnson said the risk of market-share loss increased because the latest recalls include newer models on dealer lots.

RBC Capital Markets analyst Joseph Spak said the charge for the recalls worked out to less than $100 per vehicle, but the greater risk was the potential damage to GM's reputation and whether that would force the company to offer higher incentives to customers to defend its U.S. market share.

(Reporting by Ben Klayman; editing by Matthew Lewis)

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