GM profits hit by recalls cost in 2014 Q1

GM has seen its 2014 Q1 profits hit by a $1.3 billion charge to cover the cost of a huge recall of cars over defective ignition switches.

The faulty switches could turn off the engine, disabling the airbags and have been linked to at least a dozen deaths.

General Motors says it also incurred $300 million in restructuring costs, mostly in Europe.

As a result net income was $125 million, compared with $865 million in the same period last year. Sales came in at $37.4 billion, up from $36.9 billion in 2013.

GM said that of the $1.3 billion recall charges, some $300 million was to cover the cost of courtesy cars.

“Obviously, the recall campaign charges in the first quarter overshadows the headline results, but if you look underneath that, we had strong performance across the board,” chief financial officer Chuck Stevens said.

It was GM’s worst quarterly performance since it posted a net loss after leaving bankruptcy protection in 2009.

The company had raised vehicle costs during the quarter, which helped boost operating profits by $1.8 billion.

In North America, GM experienced higher sales of its more lucrative versions of its redesigned Chevrolet Silverado and GMC Sierra full-size pickup trucks.

“The performance of our core operations was very strong this quarter, reflecting the positive response of customers to the new vehicles we are bringing to market,” said GM CEO Mary Barra.

“Our focus remains on creating the world’s best vehicles with the highest levels of safety, quality and customer service, while aggressively addressing our business opportunities and challenges globally.”

During 2014 Q1 the company was also hit by another charge of $419 million, “related to changing the exchange rate GM uses for re-measuring the net assets of its Venezuelan subsidiaries”.

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