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GM Announces $500 Cash Allowance, Free Loaners to Car Owners Affected by Recall

March 14, 2014
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General Motors announced that they will be offering a $500 cash allowance to 1.37 million U.S. owners of vehicles affected by the ignition switch recall. The discount will be used in the purchase or lease of a new vehicle and is good for any 2013 to 2015 model year vehicle from GM brands Chevrolet, GMC, Buick and Cadillac.

The Detroit-based car manufacturer also instructed dealers to offer loaner vehicles to the customers who own the affected Chevrolet, Saturn and Pontiac autos. Those who request for a loaner can use the vehicle until repairs have been made on their car.

GM also mentioned that it will cover the cost of towing the affected vehicles to the dealership for customers who need such service.

GM sent a notice to dealers about the cash allowance offer back in March 4, but the notice was only recently posted by the National Highway Traffic Safety Administration (NHTSA). “GM will not market or solicit owners using this allowance,” the notice reads. “We ask that you not market to or solicit these customers either. This allowance is not a sales tool; it is to be used to help customers in need of assistance.”

The automaker also instructed dealers to tell customers to eliminate all items from their key rings, even the key fobs.

According to the notice, GM will start making the repairs to the recalled vehicles around April 7. Included in the ignition switch recall are the following: 2005-2007 Chevrolet Cobalts; 2007 Pontiac G5s; 2003-2007 Saturn Ions; 2006-2007 Chevrolet HHRs; and the 2007 Pontiac Solstice and Saturn Sky.

The notice was revealed as the federal government proceeds with the probe about GM’s long overdue recall regarding faulty ignition switches, which were connected to 12 traffic fatalities. The carmaker previously claimed that there were 13 related deaths, but later on reduced the number to 12 after it said it double-counted one fatality.

The announcement about the $500 discount made headlines after The Detroit News reported that the cost of replacing the ignition switch is quite low. As reported by JP Morgan analyst Ryan Brinkman, the price of the replacement part is only between $2 to $5. Labor cost will be low as well, since the part can be replaced in mere minutes.

Delphi Corp., which supplied GM with the faulty parts, is expected to shoulder some of the replacement costs.

In a letter to GM CEO Mary Barra, auto safety advocates (and critics of the automaker’s handling of the ignition switch recall) Clarence Ditlow and Joan Claybrook asked the company to create a $1 billion trust to compensate the victims affected by the defective part.

“By concealing the ignition key defect for at least 10 years, GM created more victims and then robbed them of their legal rights through the passage of time,” the letter reads.

GM has undergone bankruptcy restructuring in 2009, which protects it from liabilities for accidents and decisions that have occurred before the bankruptcy. Most of the deaths happened before that year. Delphi also may not be liable, as the company also underwent bankruptcy restructuring.

Photo credit: Michigan Municipal League/ Flickr/ CC BY-ND

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