New CEO sees GM’s profit dented by the 7 million cars it recalled image

Come tomorrow, we wouldn’t be surprised if General Motors posts a first quarter loss. That’s far from last year’s estimates that new CEO Mary Barra would bring home for 2014 a record $10 billion profit.

Just as losses continue to mount up in recovering Europe and the company faces new challenges in Russia, Australia, Asia and South America, in February came the scandalous recall of almost 2.6 million cars linked to the ignition switch defect that caused 13 deaths and at least 30 accidents with injury.

That’s enough to prompt the majority of analysts to seriously downgrade their earnings estimates for General Motors. Some of them even predict GM will have its worst quarter since Q4 in 2009, when the automaker was fresh out of bankruptcy.

“It’s certainly been a trying 100 days” since Barra started on Jan. 15, said Brian Johnson, an industry analyst with Barclays Plc. “Since the IPO, GM has executed well in many areas, but overall nowhere near as strong as our admittedly high expectations,” Jonas wrote in a note. “There’s just no other way to put it — we were off by a country mile.”

Besides the mounting difficulties in many markets – which prompted GM in January to say it expected “modestly” improved adjusted earnings before interest and taxes – in just three months the total tally of recalled vehicles has mounted to almost 7 million units.

Now, for the scandalous 2.6 million cars recalled in relation to the ignition switch defect, GM is under investigation from the US Congress, federal safety regulators like the NHTSA and the Justice Department.

Via Bloomberg