GM prepares dealers for onslaught of recall work

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DETROIT -- General Motors is lining dealer inventories with rental cars as customers begin turning in Chevrolet Cobalts, Saturn Ions and other recalled models with faulty ignition switches for repair.

GM has altered its rental car policy and has agreed to work with Enterprise, Hertz and Avis to ensure rentals are available to customers if demand exhausts dealer courtesy cars. GM also is offering customers towing service and a $500 discount on new cars in addition to the free fix.

“Normally we require a GM vehicle when we do any rental assistance, but we’ve waived that,” said Jim Cain, a GM spokesman. “We’d expect most, if not all of the customers, will receive a new GM product but if one is not available, we don’t want anyone to be inconvenienced.”

The automaker has also added a provision to cover insurance costs for drivers under age 25 or underinsured. Customers may receive an older rental vehicle if there are availability constraints, Cain said.

Laura Bryant, a spokeswoman for Enterprise Holdings, said the company is communicating daily, if not hourly, with GM to assist customers. Enterprise operates 900,000 rental vehicles in the United States.

The recall -- and GM’s delay in responding to the issue first noticed in 2001 -- has prompted a U.S. criminal investigation, an internal probe by GM, two congressional hearings in April and several civil lawsuits.

The recalled vehicles include 2003-07 Ions, 2005-07 Cobalts, 2006-07 Chevrolet HHRs, 2006-07 Pontiac Solstices, 2007 Pontiac G5s and 2007 Saturn Skys.

GM expects to record a charge of about $300 million on its first-quarter earnings report to cover repair and rental costs of the ignition switch recall, plus the costs of three new recalls caused by unrelated defects, affecting an additional 1.5 million units.

Thousands of customers have received loaner cars from dealers, who are unable to order the new ignition switch until April 7.

The repair can be made in 30 minutes. GM has asked dealers not to stock parts because of tight supplies. Instead, GM wants retailers to order as needed after contact with owners.

CEO Mary Barra said the supplier making replacement ignition parts is adding a second production line to double the parts’ availability.

“It will be months before all of the recalls are repaired,” Cain said. “We’ll have a critical mass on or about April 7 and we’ll send follow-up letters.”

A directive sent to dealers early this month underscored the extent to which GM is relying on retailers for damage control.

GM suggested carefully scripted answers to recall-related questions that dealers likely will field in coming months from affected owners as well as other customers who have seen the crush of media coverage and are wondering what went wrong.

So far, Cain said, the dealer response to the automaker has been positive.

“It’s little bit of extra work for dealers,” he said, “but when you put that up against what we’re trying to accomplish for the customer -- trying to fix their vehicle as quickly as we can with as little inconvenience as possible --this is certainly extraordinary.”

Mike Colias contributed to this report.

You can reach Ursula Zerilli at uzerilli@crain.com.


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