GM dealers counsel anxious car owners on recall

The chatter on the showroom floor of John McEleney’s Chevrolet dealership this week focused more on defects than deals.

General Motors Co.’s chief executive officer faced two days of congressional hearings this week about the automaker’s slow response to fatally flawed ignition switches. That has McEleney worried about his Clinton, Iowa, business.

“It’s a little bit unnerving because GM is on the front page - not of the business section, but the front page of the paper and the lead story on the news every day,” he said. “People are concerned because they’re GM owners, and they see all this publicity regarding GM.”

GM dealers are gearing up for an onslaught of owners returning to their stores next week to receive repairs on the 2.59 million cars the automaker has recalled for faulty ignition switches linked to13 deaths. The dealers have already had to act as therapists to customers who have been flooding phone lines with worries about the flaw that allows the ignition key to fall out of the “on” position, disabling the engine and air bags.

McEleney has been down this road before. Sales swooned at his adjoining Toyota store in 2009 and 2010 when the Japanese automaker recalled more than 10 million vehicles for defects linked to unintended acceleration. He’s hoping it will be different this time because the Toyota recall involved cars on his showroom floor, while GM’s recall is for older models such as the Chevrolet Cobalt that he no longer sells.

“There was a much higher percentage of Toyota owners that were concerned and impacted directly,” McEleney said.

Customers are “confused and concerned,” said Nicole DeNooyer, general manager of Robert DeNooyer Chevrolet in Holland, Mich. “They want to know, ‘Is my car part of the recall? And if it is, how bad is it?’”

DeNooyer has been telling customers not to drive their Cobalts, Chevrolet HHRs and Saturn Ions and has put about 30 owners of the small cars into free loaner vehicles. GM CEO Mary Barra told two congressional committees this week that the cars are still safe to drive as long as owners don’t use a key ring, which could be heavy enough to pull the key out of position.

There’s less comfort among customers who are suddenly worried about their safety and the value of their GM car, dealers said.

“This stirs our owners who are in possession of those cars into a panic,” Jim Stutzman, a Chevrolet-Cadillac dealer in Winchester, Va., said of the congressional hearings. “It’s setting this thing up like it’s this catastrophic emergency situation and that they could be killed at any moment driving their car. And that’s not the case.”

Senators this week accused GM of “criminal deception” and a “culture of cover-up” because the automaker for years passed on proposed fixes from its engineers because, according to one memorandum, it could have cost an extra 57 cents per car. Barra apologized for GM’s slow response and pledged to make changes so “this never happens again.”

The congressional questioning is hurting GM’s reputation in the same way that hearings leading up to its government bailout and 2009 bankruptcy were a setback,Stutzman said.

“It’s like reliving the bankruptcy experience all over again,” he said. “There are people who have walked away from General Motors products and dealers because they felt the bailout was wrong.”

Now Stutzman sees consumers turning away because of the recall, which came after the U.S. government sold its final GM shares in December and as the automaker was shaking the stigma of what some bailout critics called “Government Motors.”

“We had great momentum coming out of February,” Stutzman said. “Then we definitely saw a slowdown in our traffic and people’s interest in our products. I don’t think we’re alone. When we talk to other dealers in our region, I think a lot of people are feeling it.”

That’s contrary to what GM reported for its total U.S. sales last month. Nationwide, GM’s sales rose 4.1 percent in March, and its current small-car models, the Chevrolet Sonic, Spark and Cruze, jumped between 14 percent and 46 percent.

“This has certainly been a trying month for GM, but you wouldn’t know it by looking at its sales,” said Jessica Caldwell, a senior analyst for auto researcher Edmunds.com. “Nothing in our data shows that shoppers are shying away from new GM vehicles - at least for now.”

The hit to sales, though, could come later as the blaring headlines generate more awareness of GM’s problems and create uncertainty about the quality of its products, dealers said.

“Some of that you don’t see right away,” said Paul Krajnik, service manager of Krajnik Chevrolet in Two Rivers, Wis. “People choose a different make of car, and we don’t always see that right away. I’m sure that will happen some.” Information for this article was contributed by Mark Clothier of Bloomberg News.