Things are not looking well for General Motors, which has been widely panned for the recall over a defective ignition switch. With probes coming from NHTSA and the Congress and mounting liability issues, GM looks cornered.
The No.1 US automaker has also put investors on their toes following its way of handling the recall and public outcry from lawmakers. The concerns over the huge scandal could lead the company’s shares plummet beneath GM’s $33 IPO price for the first time since almost a year ago.
GM’s bankruptcy was back in 2009, when the automaker was bailed out by a $49.5 billion investment mainly coming from the US federal government – and its shares dropped below the price last time in June 28, 2013. Now, the shares are trading on the New York Stock Exchange dangerously close to the mark, closing yesterday at $33.30.
The company’s shares hit their highest mark last year in December, when the government sold the last pile of stock it had in the automaker – they were $41.85 on December 17 – and since then, mainly because of the ignition switch recall, they slid around 20%.
Because bad news is usually followed by more bad news, GM yesterday also announced it has raised the first quarter charge that covers the ignition switch repairs and other costs. Previously the automaker said it would be hit by a $750 million cost, now raised to a total of $1.3 billion – as the number of defective cars went up from 1.3 to 2.6 million.