GM’s first-quarter profit dragged down by recalls

Product recalls marred what would have otherwise been an impressive period for GM. Overall revenue was up $500 million to $27.4 billion at the biggest US automaker.

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Product recalls marred what would have otherwise been an impressive period for GM. Overall revenue was up $500 million to $27.4 billion at the biggest US automaker.

General Motors squeezed out a small profit in the first three months of 2014 after setting aside $1.3 billion to cover the cost of recalls that followed a deadly ignition-switch defect linked to 13 deaths, the company reported Thursday.

The report marked the 17th consecutive profitable quarter for the giant automaker, which has been walloped by a storm of lawsuits, federal and congressional investigations, and negative publicity since it began recalling 2.6 million Chevrolet Cobalts and other small vehicles in February.


With the heightened scrutiny prompted by the ignition switch problem, GM recalled 4.5 million more vehicles in the first three months of the year.

The recalls are taking a huge financial toll that is likely to persist with GM facing the prospect of both civil and criminal penalties because of the slow recall. The company’s $100 million profit was just a fraction of the $900 million that flowed to its bottom line in the first quarter of last year.

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GM disclosed Thursday that the Securities and Exchange Commission has made inquiries about the recall and confirmed for the first time that the US attorney’s office in New York and an unidentified state attorney general are conducting investigations.

The SEC is probably investigating whether GM failed to disclose the switch problem to investors quickly enough, said Peter Henning, a former SEC lawyer who now is a law professor at Wayne State University in Detroit.

The recall charges marred what would have otherwise been an impressive quarter for GM. Overall, revenue was up in the first quarter of the year, going to $27.4 billion, $500 million more than during the first quarter of 2013.


‘‘Sure, there have been setbacks,’’ GM chief executive Mary Barra said during a conference call with analysts. ‘‘That’s part of our business. Nevertheless, our overall progress has been sure and steady.’’

GM has been soaring since its 2009 bankruptcy and $40 billion federal bailout that allowed it to shed burdensome legacy costs and update its vehicle lineup. Sales have been up — increasing by 4 percent in 2013 and by 2 percent in the first quarter of this year.

But the progress being made by what Barra and others call ‘‘the new GM’’ is being threatened by the legacy of the ‘‘old GM,’’ which Barra and others have depicted as a cash-strapped giant that fostered a culture focused more on cost savings than quality and safety.

GM is exploring setting up a compensation fund for accident victims.

The company has hired Kenneth Feinberg, who organized efforts to compensate victims of the BP oil spill and the 2013 Boston Marathon bombing, to explore options.

Material from the Associated Press was used in this report.
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