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GM sales appear resilient amid recalls, dealers optimistic

The General Motors logo is seen outside its headquarters at the Renaissance Center in Detroit, Michigan in this file photograph taken August
The General Motors logo is seen outside its headquarters at the Renaissance Center in Detroit, Michigan in this file photograph taken August

By Nick Carey

CHICAGO (Reuters) - In the midst of an historic run of recalls, including over one defect linked to at least 13 deaths, General Motors Co sales are showing resilience.

The No. 1 U.S. automaker is beating the industry average this month, according to one estimate, and more than 10 dealers interviewed by Reuters were upbeat, saying lingering concerns about the safety of the company's current new car lineup are dissipating even as the number of recalls rise.

While dealers report some wariness from owners of GM cars, they say GM's mounting recalls - the 15.8 million vehicles globally recalled in 2014 is more than last year's total U.S. new car sales by all manufacturers -- are not stoking fears.

Nearly two months ago, after her Texas dealership had missed its own March sales target, Ancira Motor Company Vice President April Ancira told Reuters that it would take time for GM to gain back lost customers and that Chevrolet was "suffering". This week, she said that dealership traffic had rebounded from a dip and customer worries have waned. Once-frequent concerned customer calls have declined to a call or two a week.

"There are still a few customers concerned about safety, but GM has really stepped up to the plate," she said, citing free rental cars for customers waiting for repairs to Chevrolet Cobalts and other models with defective ignition switches, the highest profile recall linked to 13 deaths. GM's U.S. recalls, 29 this year, show its concern with safety, she said.

Investors have been less relaxed. GM stock is down almost 20 percent this year and the company has announced $1.7 billion in recall-related charges in the first two quarters.

In its latest announcements this week, GM recalled 2.6 million vehicles due to possible faulty seat belts, transmissions, air bags and fire issues, and another 284,000 to address a potential fire hazard.

In previous surveys by Reuters, dealers reported a barrage of customer calls with questions about the safety of their cars, especially the 2.6 million vehicles, including Saturn Ions and Cobalts, recalled for the ignition switch defect linked to the deaths.

But all four of GM's U.S. brands reported April sales increases, and according to LMC Automotive research, GM's retail sales through May 18 were up 3.5 percent compared with the same period a year ago, higher than the industry average of 0.5 percent.

Buckingham Research Group this week recommended buying GM stock aggressively, saying in a note to clients that thus far "there has been no measurable impact in the marketplace, and we believe that will continue."

A weekly analysis of customer "consideration" for GM brands by industry researcher Edmunds.com shows no significant impact of the recall so far.

George Hoffer, a University of Richmond transportation economist, said that as the ignition switch recall involves some older vehicles and defunct brands, its impact has been muted. He added that constant media coverage of recalls has "inoculated" consumers against them.

Toyota's recall of more than 9 million vehicles in 2009 and 2010, partly related to unintended acceleration, led to a dip in sales and resale prices for the brand, said Larry Dominique, executive vice president at industry researcher TrueCar.com. But it dissipated when negative headlines about the recalls faded, he argued.

Toyota's share of the U.S. market has still not returned to its 2009 peak, although the company has had to deal with issues beyond its own cars, including improved quality from its competitors and the aftermath of the 2011 Japanese tsunami.

During GM's April 24 quarterly earnings call Chief Executive Mary Barra was asked by an analyst whether increased traffic in dealerships related to the recalls could lead to new sales.

Apart from stressing concern over the ignition switch issue, Barra said GM was focusing on customer service through the recall process and offering employee pricing to car owners.

"We see that as a huge opportunity," she said of the increased traffic to dealerships.

Matt Jones, a senior editor at Edmunds.com who focuses on dealerships, said that the opportunity for new car sales during the recall process is not that high.

"When people come in for a recall they're not in the buying stage, they're in the fix-it stage," he said.

But several dealers said they had sold a small number of cars to recall customers and appeared to take the attitude that any customer on the lot was a sales opportunity.

"The key is to make this as pleasant and smooth an experience as possible so that when these car owners are ready to buy, they'll think of us," said Andy Sweis, general manager at Jennings Chevrolet in Glenview, Illinois, who said his dealership had seen "a few" sales to recall customers.

Al Cerrone of Cerrone Chevrolet Buick & GMC Truck dealership in South Attleboro, Massachusetts said some customers are trading in recalled cars for new Buicks.

Now a consultant at the dealership he recently sold, Cerrone said customers are aware of the recalls but don't disparage GM.

"The silver lining is pent-up demand," he said. "They've held out for a long time because of the economy or whatever, but now it's time for them to buy."

(Additional reporting by Ben Klayman in Detroit and Tim McLaughlin in Boston, editing by Peter Henderson)

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