In the past seven years, General Motors has had three instances where they’ve had to recall a number of their cars for the risk of leaking oil and catching fire.
1.4M are being recalled, dated to the 1997 model year, because repairs from the other two recalls did not work. The company reported that 1,300 cars caught fire even after they were fixed by GM dealerships.
A Repetition of the 2008 and 2009 GM Recalls
The issues with GM models started in 2007, when 21 customers filed complaints about engine fires from their cars, and this prompted an investigation from the National Highway Traffic Safety Administration to investigate. Three injuries came from these engine fires, and the agency concluded that all fires happened 5-15 minutes after the engines were turned off.
This investigation resulted in the GM recall of 2008, which took back over 200,000 American cars with supercharged engines. In less than a year GM recalled an additional 1.5M cars, these did not have supercharged engines. The recall was for replacing the spark plug wire channels that spread the fires, but documents on the progress of this did not show any indication that there was anything being done about the oil leaks.
GM Cars Responsible for 267 Fires
Naturally, American safety regulators became aware of these fires, and since then, GM has reported nineteen minor injuries related to the oil leakage. In 2008, a spokeswoman from the company declared that the cars were responsible for 267 fires, 17 of which burned entire structures.
The issues are likely caused by worn valve cover gaskets, which degrade with time. This can cause oil to leak, and with hard braking, these oil droplets can fall on the exhaust manifold and catch fire. These embers can spread to one of the plastic spark plug wire channels and set the rest of the engine ablaze.
This recall includes the 1997-2004 Pontiac Grand Prix and the Buick Regal; the 2000-2004 Chevrolet Impala; 1998-1999 Chevrolet Lumina and Oldsmobile Intrigue and the 1998-2004 Chevrolet Monte Carlo. All of these models have one thing in common: they are all equipped with 2.8-liter V6 engines.
Alan Adler: ‘GM Recall Could Result in Material Charge to Earnings’
Alan Adler declared that GM has not come up with a solution to the oil leakage problem and that the recall was planned after they discovered that 1,300 of the reported fires were caused by 2004 models. GM plans to use state registration databases in an effort to track down car owners.
This recall is so large that the company’s fourth-quarter earnings may be affected, but Adler insist it is to early to say, adding that since a remedy has not been decided, it is not known whether the cost may result in a material charge to earnings.
