How Will The Ignition Recall Affect GM Sales?

I have conversations with car-buyers on a daily basis, in fact, I often will talk about the auto industry with people who are not even in the market. Most of the conversations revolve around a cool car that is about to come out or a vehicle that they are considering for purchase. But recently I have been getting questions like these: "What is up with that ignition recall?" "Is it true people have died?" "Did they (GM) know about it? "Are Chevy cars unsafe?" Brand perception among car-buyers is an incredibly powerful factor on whether or not they will purchase. And nothing can ruin a brand's credibility more than the perception that an automaker is unsafe.

While I will tell people that the current Chevy lineup is just as safe as other vehicles in the same segment, once that seed is planted it is very difficult to stop it from growing. A brand that is perceived to be unsafe can have a drastic impact on sales. The unintended acceleration issue with Audi in the 80's almost crippled the automaker in the US. It took Audi a long time to recover, and ghosts from that area still haunt them. It is also hard for car buyers to separate an incident involving specific models from them generalizing about the overall integrity of a brand's offerings. When Ford recently had a string of recalls related to engine fires, it cast doubts in the minds of shoppers on Ford's quality control for other vehicles. Ford has taken steps to remedy their issues and sales are on a rebound.

Now the interesting thing about brand perception is the juxtaposition between the desirability of specific vehicles and the perception of their quality/safety. Take for example the Jeep Wrangler Unlimited, Consumer Reports ranked it the lowest scoring car on sale giving it a 20 out of 100, yet it is one of Jeep's top sellers. Say what you will about CR's recommendations, the fact is they are perceived as an objective evaluator of vehicles and they are the most referenced source of information for the vast majority of car-buyers. So what does this have to do with GM? Folks that want Silverardos and Corvettes are unlikely to be swayed by this ignition scandal, because those vehicles have such a strong following. However, cars like the Cruze, Malibu, and Traverse that are competing in very crowded and hyper competitive segments are in for a more difficult battle. When car-buyers come to me about vehicles in popular segments like compact sedans, mid-sizers, and crossovers, rarely will someone ask, "What do you think about the Malibu/Cruze/Traverse?" The majority of shoppers have a tendency to default towards imports, again due to the perception of superior quality. While It is difficult to quantify how a recall or safety issue affects long term sales of a given brand, when a buyer goes from ambivalence to active avoidance that is bad for business.

It is also true that most car buyers have short memories, the Toyota unintended acceleration debacle in 2010 seems like ages ago. At the time Toyota was criticized for not acting "fast enough" but the automaker did seem to make a good faith effort to rectify the situation and reassure buyers of their commitment to making reliable and safe vehicles. What I found most fascinating about the Toyota case is that when the investigations were complete-

"The DOT concluded that, other than a number of incidents caused by accelerators hanging up on incorrectly fitted floor mats, the accidents were caused by drivers depressing their accelerators when they intended to apply their brakes. 'Pedal misapplication' was the DOT's delicate terminology  for this phenomenon."

In the end Toyota was not really at-fault with the unintended acceleration case, but they still continued to back their consumers and didn't really mention that is was "bad driving" and not "bad engineering" on Toyota's part. Toyota knew the sooner the story went away the faster they could recover. As to the GM ignition recall, the most recent news states that 303 people could have died from inactive airbags due to the ignition defect and more details are coming out everyday.This combined with the fact that GM might be immune to civil lawsuits due to a taxpayer backed managed bankruptcy during the time when the vehicles in question were being produced, can create a perfect storm for consumer backlash. The longer GM stalls and points fingers in other directions the longer this narrative will be in the minds of potential car buyers. Consumers can forgive an automaker for having a "bad run" of products for a number of years, just look at Audi's comeback, but car buyers don't easily forget active negligence that cost people's lives.

@AutomatchTom is a professional car buying consultant, lover of all things automotive and a bit wagon obsessed. You can find more ramblings and plenty of carporn here.