Every automaker has recalls. Ford Motor (F) has had them. Toyota Motor (TM) has had them. But has anyone ever had a string of recalls like General Motors (GM), which has recalled nearly 16 million cars? That, of course, begs the question: How many more cars can General Motors recall?
REUTERS Citigroup’s Itay Michaeli tries to answer that question:
…we began with MY'06 and higher vehicles where we first bucketed "complaint/recall catalysts" and then concatenated the databases to yield a unique identifier based on vehicle MY, make, model & catalyst. For complaints, we looked at each unique identifier to identify unique VIN numbers. We ran a similar analysis for the recall database and then cross-referenced both data sets to see how many recalls had registered complaints to generate a number of complaints-per-concatenated recall. We then went back to look for complaints where the number exceeded the simple average but have yet to be recalled. Our analysis highlighted ~275 unique concatenations across ~50 GM models not yet recalled. When we looked at total production of these models, we calculated a max potential for 10.0-11.5 million vehicles. At ~$78 cost/vehicle (similar to Q2 charge), this would amount to $800-$900mln or $~0.35/share. Note that not all recalls originate from NHTSA complaints.
And what if General Motors recalled everything? Michaeli estimates that General Motors has 68 million cars on the road, which would imply $4.2 billion, or $1.60 a share, of risk, if cars that have already been recalled are exuded.
Clearly, the recalls must be having an impact: General Motors has dropped 0.6% to $34.38 t 12:15 a.m. today, while Toyota Motor has gained 1.3% to $111.34 and Ford Motor has advanced 1.4% to $16.54.
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