GM Stock Price Jumps Ahead Of Possible 870,000 Vehicle Recall

Generally, large recalls are bad for a car company’s reputation and its bottom line. General Motors  (NYSE: GM) is facing a huge recall of as many as 870,000 vehicles. These include the models in question: the 2019-2024 Model Year Chevrolet Silverado 1500 and GMC Sierra 1500 pickups along with the 2021-2024 model year Chevrolet Tahoe, Chevrolet Suburban, GMC Yukon, and Cadillac Escalade SUVS.

The NHTSA Office of Defects Investigation has received 39 reports, which include engine warnings in the vehicles. The description of the problem is “bearing failure that may result in either engine seizure or breaching of the engine block by the connecting rod.” The loss of power could cause an accident. The Detroit Free Press writes, “GM said it would continue to cooperate with NHTSA on the matter.”

Warranty problems are not unheard of. Huge recalls can trigger large changes to earnings, which makes them worrisome to investors. Ford’s (NYSE: F) warranty write-offs were into the hundreds of billions of dollars last year.

GM has been able to ride its success over the last year to a stock run up of 43%. This compared to a 10% drop in Toyota’s (NYSE: TM) shares and a Ford stock fall of 9%. Any large write-off could dent the large increase in Ford’s shares