GM sales rise despite millions of recalls

Yahoo Finance

U.S. auto sales are nearing their pre-recession peaks but could stall out once they get there.

A new report from AlixPartners in Southfield, Michigan, forecasts U.S. annual auto sales could reach 16.9 million in 2016--just under the 17 million pre-recession peak, then retreat to 15.4 million by 2019.

Auto sales are "definitely losing some strength," says Yahoo Finance senior columnist Mike Santoli. They had benefited from a "very strong catch-up demand" after the Great Recession but now that gap is closed and Americans are driving less despite the fact that the economy is at a nominal all-time high, says Santoli. "Maybe we're just not as much of a driving society as we used to be."

U.S. auto companies are reporting their June auto sales today. Chrysler sales were up 9%--beating expectations. Ford (F) sales fell 6% and GM (GM) sales rose 1%--despite the company's massive recalls of 29 million vehicles--most of them for faulty ignition switches. That total recall number exceeds GM's combined sales from 2005 through 2013

It was the strongest June for GM and Chrysler sales since 2007.

In addition to its recalls, GM has also offered to pay as much as several million dollars to each of the families of those killed or severely injured in accidents involving GM cars with defective ignition switches, according to Kenneth Feinberg, administrator of GM's compensation fund.

The recalls and potential payouts, however, don't appear to have hurt GM sales or its stock. GM shares have gained almost 6% in the past three months. "On the day when they had this very latest recall announcement and the announcement of perhaps the settlement amounts that are going to be to be paid out to some of those victim families, the stock went up," says Santoli, referring to Monday.

"The market seems to be saying 'we really don't think that this is a problem going forward for GM in terms of market share,'" says Santoli. "Customers are shopping for deals....They don't perceive a big loss of quality in GM brands."

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