33,000 cars equipped with 'suspect' Takata inflators
THE GM RECALL

GM halts sale of some 2013-14 Chevy Cruze models for airbag glitch

33,000 cars equipped with 'suspect' Takata inflators

The freeze on Cruze sales comes as Chevy dealers chase quarterly sales targets that can determine whether they earn bonuses.
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DETROIT -- General Motors told U.S. and Canadian dealers to temporarily halt delivery on Wednesday of some 2013 and 2014 Chevrolet Cruze sedans because of a potential problem with airbags supplied by Takata Corp., hampering sales of the automaker's top-selling car amid an end-of-the-month sales push.

Some of the cars may have a "suspect" driver's-side airbag inflator module, according to a stop-delivery order sent to Chevy dealers nationwide on Tuesday and obtained by Automotive News. GM expects to file an official recall notice "soon" with the National Highway Traffic Safety Administration, spokesman Jim Cain said.

About 33,000 cars may be affected. In a crash, the airbag could fail to inflate, GM said.

The stop-sale order was lifted late Wednesday after the specific vehicles were identified. GM is working on a likely recall of those cars, according to a person familiar with the process who spoke on the condition of anonymity, Bloomberg reported.

The issue is not directly related to other problems with Takata airbags that have led to the recall of about 10.5 million vehicles worldwide, many of them made by Honda Motor Co. and Toyota Motor Corp., including 3 million earlier this week.

With the Cruze, GM is "moving quickly to identify the vehicles involved, and other facts, including whether there are any accidents or injuries, all of which will be shared" with U.S. safety regulators, Cain said.

"The inflator module may have been assembled with an incorrect part," GM's notice to dealers says.

The order initially covered all Cruze models from the 2013 and 2014 model years before the field of suspect vehicles was reduced.

The 33,000 cars now under scrutiny are a mix of dealer stock and vehicles already in customers' hands. Cain said "most" of the Cruze inventory on dealer lots is unaffected and those cars should be free of sales restrictions by Thursday.

On June 1, GM had 53,700 Cruzes on dealer lots or en route to dealerships, according to the Automotive News Data Center.

“This is exactly the perfect storm when you have two companies the size of General Motors and Takata, which has supplied multiple OEMs, having massive recalls,” Dennis Virag, president Automotive Consulting Group, said in a telephone interview. “It’s just a situation that is beyond comprehension.”

Another setback

The stop-delivery order marks the latest safety-related setback for GM, which already has issued 44 recalls this year covering 20 million vehicles globally. That figure counts some vehicles more than once because they've been called back for multiple repairs.

It's also the latest headache for recall-weary Chevy dealers, who in recent months have been hamstrung by stop-delivery orders on new and used vehicles, including some sidelined for many weeks awaiting fixes.

"We're disappointed to have a stop sale on our most popular car, just when we felt like we were getting some momentum," said Martin NeSmith, who owns two Chevrolet-Buick-GMC dealerships in south Georgia.

Dealers are required to hold new and used '13 and '14 Cruzes on their lots and not deliver them to customers "until further instructions are received … in the near future," the notice says.

"We are working diligently with the supplier to identify the parts in the affected vehicles so we can resume delivery," Cain said earlier Wednesday.

GM earlier this year recalled 21,000 Cruze sedans from model year 2012, also equipped with Takata airbags that could fail to inflate in a crash because of electrical problems.

For model year 2013, GM introduced a new Takata "smart" driver-side air bag on the Cruze, which the automaker said helps reduce the risk of injury in crashes.

Production of Cruze sedans continues at GM's plant in Lordstown, Ohio, Cain said.

Sales targets

The freeze on Cruze sales comes as Chevy dealers chase quarterly sales targets that can determine whether they get paid bonuses that range from around $10,000 for a small dealership to more than $150,000 for big stores under GM's Standards for Excellence incentive program.

"It makes it hard to hit your numbers when you can't sell these cars," NeSmith said. "Even if we only miss one or two or three because of [the stop delivery], it could cost us several thousand dollars."

GM is pressing for a big month for Cruze, Chevrolet’s top-selling car. U.S. sales of the compact were up 18 percent through May, to 119,330 units, making it among the strongest performers in Chevy's lineup.

GM is offering $2,500 in incentives on most Cruze models in June -- up $1,000 from May -- including $2,000 in cash and $500 in "conquest" money for buyers coming from non-GM brands.

The Cruze incentives, in effect through Monday, are part of GM's bid to boost the company's overall June sales by 10 percent from last June, according to a June 12 national "business update" Web presentation to dealers.

In June 2013, GM sold 264,843 light vehicles, good for 18.9 percent of the U.S. market.

"Need +10% year over year" for June 2014, the presentation to dealers said.

The Southeast dealer noted that many customers who have dropped off their Chevy Cobalts to have ignition switches replaced are driving Cruzes now subject to the stop delivery.

Cobalts are among the 2.6 million vehicles being recalled for a defective switch that can slip out of the "run" position and cut power to the power brakes, steering and airbags, a defect that GM has linked to 54 crashes and 13 deaths.

"What am I supposed to do?" the dealer said. "Tell them to bring the loaner back now?"

Bloomberg and Reuters contributed to this report.

You can reach Mike Colias at mcolias@crain.com.


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